August 14, 2015
Gold prices in India fell 7.5 per cent since January end this year. On the National Commodity and Derivatives Exchange (NCDEX), gold prices declined to Rs 25,545 per 10 grams on August 12 from Rs 27,640 per 10 grams on January 30 this year.
August 14, 2015
Gold prices in India fell 7.5 per cent since January end this year. On the National Commodity and Derivatives Exchange (NCDEX), gold prices declined to Rs 25,545 per 10 grams on August 12 from Rs 27,640 per 10 grams on January 30 this year.
India Ratings and Research last month had said that the yellow metal prices may even dip to Rs 20,500 per ten grams, a level last seen about 5 years ago, in case of a rate hike by US Federal Reserve later this year. The rating agency also added global prices of the precious metal could drop and stay in the range of $900-1,050 per ounce.
India?s gold demand in the second half of 2015 could rise by more than a quarter from a year before as lower prices encourage buying during the peak festival season towards the year-end, the World Gold Council (WGC) said on Thursday.
Renisha Chainani, senior manager, commodities, Edelweiss Financial Services lists out five reasons why gold prices plunged from January end to till date.
- Gold losing safe-haven appeal: Despite all the global economic uncertainty, “Gold as safe heaven thesis” is not really playing out. Gold prices have remained relatively muted in response to the Greek debt crisis which is a surprise. The risk of contagion is quite high and under normal circumstances the price of gold would be propped up by the uncertainty.
- Dollar strengthening and Euro weakening: An added factor is that the dollar is rising because of the revival of the American economy, which is bringing the prospect of higher interest rates. That is bad news for gold. Higher interest rates increase the opportunity cost of holding zero-yield assets: the money tied up uselessly in bullion could be earning a return if invested in treasury bills or other debt.
- Expectation of US Fed Tightening starting from September 2015: Yellen confirmed in last meeting that rates will rise this year, but it is her view that waiting too long would mean rates would have to rise at a faster pace later. She prefers to start earlier to allow for a more gradual rate path. As a result, every FOMC meeting this year — including September's — is a live meeting at which the central bank could raise rates
- Chinese appetite for gold mellowing down: The central People's Bank of China (PBoC) announced last week that bullion holdings rose to 1,658 tonnes as of the end of June, from 1,054 tonnes in April 2009. Despite the tonnage increase, Gold now accounts for 1.65 per cent of China's total foreign exchange reserves, against 1.8 per cent in June 2009. The number was much less than the perception of China holding more than 3,000 tonnes
- ETF Selling gathers: ETF holdings have dropped considerably from their 2012 record high of 2,900 tonnes ? roughly falling by a third. Gold ETFs worldwide today hold approximately 1,730 tonnes of gold.
Courtesy: Financial Express
