Gold prices have fallen to a new 6 year low and perhaps the lowest in recent memory. The sheen that gold had immediately after the Lehman Brothers is fading. Here is why gold has hit a 6-year low in the international markets of $1050 per ounce. Incidentally, gold rates in India have fallen too.
1) US Federal Reserve set to hike interest rates
The US Federal Reserve is all set to hike interest rates in the US in its next policy meet on Dec 16 and Dec 17.
If that happens, then we could see investments move away from gold into government securities. Hike in interest rates is never good news for gold.
2) Strength In The US Dollar
The dollar has been showing tremendous strength against a basket of currencies. When the dollar gains, gold tends to fall. Check and convert currency rates
3) Indian demand likely to reduce
With the Government of India coming out with a host of measures to reduce physical demand for gold like Sovereign Gold Bonds, there are worries that demand for gold could slacken, pushing gold prices lower. India is one of the biggest consumers of gold.
4) Drop in holdings of Gold ETFs
SPDR Gold Trust has said its holdings fell 2.41 percent to 639.02 tonnes on, the lowest since September 2008. This is certainly not good news for gold prices.
5) Investors chasing equities to gold
Gold has given poor returns in the last few years. As economic growth across the US gathers steam, investors believe other economies could follow. When that happens, investors tend to shift focus from gold to equities.
All in all, not a great time to be buying into gold. If you are an Indian consumer of gold, wait for gold prices to dip further before buying into the precious metal. In all probability, you could get gold at Rs 23,000 per 10 grammes at the retail level.