Low gold rates upset investors

Mumbai: Gold as an asset class has again disappointed investors by posting its second consecutive year of decline as a recovery in the US economy, easing geo-political tensions and falling global inflation have led to the yellow metal loosing its appeal as an effective hedging instrument during 2014.

Experts tracking the bullion markets said that the prices of yellow metal would remain under pressure in 2015 as dollar is expected to str-engthen further once the US Federal Reserve starts hiking interest rates. In rupee term, the prices of gold have dropped about nine per cent in 2014 to trade at Rs 26,662 per 10 gram. Even in 2013, the gold witnessed sharp correction due to improved global economic outlook.

However, experts added that the correction in gold prices in 2015 would not be as steep as it was during 2013 and 2014.“We are bearish on gold at the moment. However, we don’t expect the gold to witness a major correction from its current levels. The prices of yellow metal could hit Rs 25,000 per 10 gram in the domestic market and $1,100 per ounce in the international market,” said Naveen Mathur, associate director, commodities and currencies at Angel Broking.

According to Mr Mathur, the US dollar is expected to appreciate against the other major currencies in the world and therefore the Indian rupee would come under pressure.  “If the rupee depreciates, gold will be able to hold on to its prices,” he added.