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Gold prices may fall in long term, say experts

Waiting to buy the yellow metal? Wait a little longer. Gold prices may spike in the short term, but over the longer period prices prices may dip further as the metal loses its safe haven appeal, say some experts.

business Updated: Mar 27, 2014 02:09 IST
Manik Kumar Malakar

Waiting to buy the yellow metal? Wait a little longer. Gold prices may spike in the short term, but over the longer period prices prices may dip further as the metal loses its safe haven appeal, say some experts.

"Global gold prices may head higher in the short term due to the recent turmoil in the Ukraine and disappointing economic numbers from China," said Sugandha Sachdeva of Religare Securities. She added that Indian gold prices may inch towards Rs 31,500 per 10 grams in the short term.

However, the long-term is a different story. "Prices can find it difficult to sustain at higher levels, as the US Fed has already started to trim its bullion-friendly bond buying programme, tracking the improvement in the US employment data. It might even increase the pace of tapering, if the economic conditions continue to surprise on the upside," she said.

Gold closed at Rs 29,580 per 10 grams on Wednesday.

According to a Macquarie Economic Research report, quoting the commerce ministry, Indians have started buying less gold, with monthly gold imports shrinking to an average of $1.3 billion since June 2013 compared to an average of $5.1 billion in the previous 12 months. India last year imposed curbs on gold imports in a bid to control the current account deficit, which had a record high in August 2013.

"Any cut in the high import duty might result in further drift in prices," said Sachdeva.

She added that if gold prices hit Rs 27,500 per 10 grams, it "will open good opportunity to the long-term investors for accumulation into the yellow metal."

Experts also said that if a stable government is formed post the upcoming elections and the reforms are implemented, investor bias could shift towards equity and real estate with gold losing its sheen.