Gold prices, which have crashed almost 20 percent from the record high of Rs.32,500 ($602) per 10 gram last September, are likely to stabilise in the range of Rs.25,000 to Rs.26,000 in the medium term, analysts say.
“I don’t expect any major pullback in the medium term. It should stabilise this year in the range of Rs.25,000 to Rs.26,000,” Naveen Mathur, associate director for commodities and currencies at Angel Broking said.
Mathur, however, said in the long term (2-3 years) gold prices were likely to regain their 2012 high.
“Our long-term outlook on gold is bullish. It should go to that level. However, in the near to medium term, there is not much scope,” Mathur said.
Gold prices hit an almost three-year low of Rs.25,680 Wednesday, 21 percent down from the record high of Rs.32,500 in September 2012. The price recovered towards the end of the week on the back of retail buying. Gold traded at around Rs.27,100 on Saturday.
The prices crashed this year after 12 consecutive years of gains.
Fears of Cyprus and some other debt-ridden European countries selling off gold and liquidations in exchange-traded funds are the primary reasons for the crash in prices.
In the international market, gold has tumbled 28 percent from the record $1,920.30 (Rs.103,565) an ounce (29 grams) in September 2011. It is down about 18 percent so far this year. The yellow metal traded at nearly $1,400 an ounce on Saturday.
According to Goldman Sachs’s, yellow metal prices may temporarily drop below $1,200. The bank’s 12-month forecast for gold prices is $1,390 an ounce, around the same level towards the end of this week.
The sharp drop in prices is likely to boost the volume of gold jewellery sales, according to India Ratings and Research.
Sales volumes had fallen 19 percent between 2010 and 2012, while gold prices had surged around 55 percent during that period.
However, discretionary spending, according to the ratings agency, is likely to be impacted as buyers of gold for investment purposes would postpone their purchases until the gold prices stabilise.
“Operating margins are also likely to be impacted by the decline in prices as some retail jewellers quote making charges as a percentage of raw material cost,” India Ratings and Research said.
The decline in crude, gold and other commodity prices are likely to have a positive impact on the Indian economy, especially on the country’s trade and current account deficits. It will also help contain inflation and boost growth.