Gold has disappointed many investors in 2013. Mumbai standard gold prices are down from Rs 30,490 on December 31, 2012 toRs 29,720 on December 23, 2013, a loss of 2.52%. The modest loss does not depict the true picture. It is best captured by the volatility registered by the high of Rs 33,265 and low of Rs 25,130, all thanks to increased intervention by government, fall in gold prices in the international markets and a weak rupee.
Gold ETFs have seen a 22% fall in assets under management, fromRs 11,992 crore in December 2012 to Rs 9,325 crore in November 2012, according to data release by Association of Mutual Funds in India. So what is in store for investors in the coming year?
“We remain bearish on gold and expect rupee prices to go down to Rs 26,000 per 10 gram, provided the government does not reduce import duty and rupee does not appreciate beyond 59 per US dollar,” says Kishore Narne, associate director & head — commodity & currency, Motilal Oswal Commodity Broker.
Domestic gold prices are dependent on multiple factors such as international macroeconomic scenario, Indian government policies, global consumption demand and rupee dollar exchange rate, and so on.
The world financial community is bracing for money flowing back to the US from emerging markets after the Federal Reserve announced a cut in stimulus by $10 billion per month. If the US economy posts strong growth and policymakers stick to the agenda of quantitative easing, the demand for safe haven (read gold) will go down.
“Outflows from international gold ETFs are expected to further drive the gold prices down in dollar terms due to an improvement in sentiment in the US after announcement of QE taper,” says Naveen Mathur, associate director – commodities cies, Angel Broking. He expects the domestic prices of gold to remain in the range of Rs 25,500 to Rs 26,000 per 10 gram due to lack of positive triggers.
Source The Economic Time