Gold Prices Down Almost Rs. 7000 From Record Highs: Can It Fall Any Further?

Gold prices in India are on a declining trend this week and similar is the case for silver which too has plunged by a huge Rs. 10000 to quote at around levels of Rs. 57000 per kg. And talking specifically about gold, shiny yellow metal have corrected by Rs. 2500 this week and almost Rs. 7000 from its all-time high of Rs. 56200 per 10 gm struck in August first week to trade at Rs. 49380 per 10 gm in the futures market.

Now here we will understand, is there room for further correction if any in gold prices and what is causing the slump in gold and silver prices:

Why The Steep Fall In Gold Prices Lately?

Gold prices in India are trending lower tracking international rates that trade at around $1850 per ounce after breaching the psychological high of over $2000 per ounce mark. Now the primary drag on gold rates has been the surging dollar that has hit its 2-month high level.

Also, uncertainty with regard to additional bail-out package for the US economy is adding to the slump in gold prices. Else when economies tend to come out with stimulus packages, gold tends to gain in price.

Expectations on further depreciation in gold prices both in India and global markets

Current bearishness being witnessed in the bullion may persist for a while now and in the near term bulls are unlikely to take over. "We are expecting international gold prices to correct till $1,820 per ounce. On MCX, the yellow metal may test Rs 47,000. However, the long term trend is positive and we believe anywhere between Rs 45,000-47,000 will be a good entry point for buyers," said Anuj Gupta- DVP- Commodities and Currencies Research, Angel Broking.

Falling gold prices may lure buyers as marriage and festive season nears

Nonetheless, jewellers in view of significant correction in gold prices expect buyers to come back as marriage and festive season nears. "At this rate, buying will ensue. Navratri, Diwali, Dhanteras and wedding season are lined up and prices have come down at the right time to buy. Gold may correct to Rs 48,500 but overall the trend is bullish," said Prithviraj Kothari, National President of IBJA.

Outlook for gold and silver price by year end

The highs hit by gold and silver will be realized soon again. "The US economy is in a sinkhole and European bankers are also looking forward to lower interest rates, this will result in safe haven buying in gold. By the end of the year, we expect gold to hit Rs 55,000-56,000 level again," said Gupta of Angel Broking.

And silver too after sinking to Rs. 53000- Rs. 55000 is expected to scale to Rs. 75000- Rs. 8000 by the year end.

What investors can do?

Gold is a must-have in one's portfolio as it enables portfolio diversification while also act as a hedge against inflation. And in current times when year-to-date it has offered 40% return, some of the experts even suggested to increase allocation in the precious metal to 10-15%.

And now as the price of yellow metal has corrected by over 12%, one can consider buying into the metal in a staggered way.

GoodReturns.in