Amid widespread speculation over future gold prices, experts in the industry are of the opinion that the gold price bubble will soon scale down to significantly lower levels in the short to medium term.
Giving the gold price outlook for the short to medium term, Rajesh Mehta, Chairman of India's largest gold jewellery maker and exporter, Rajesh Exports Ltd (BOM:531500) maintained that the bull-run in the bullion metal will come to a halt and prices will soothe somewhat in near term. I see gold prices touching $1100 an ounce in the international markets in the medium to short term period. The prices may remain under pressure till Diwali festivities in India, Mehta told Commodity Online. However, he further added that in the longer term prices will spike off once again and may hit newer heights.
Echoing similar sentiments, Gujarat-based jewellery retailer, Manoj Soni, Director, AB Jewels Ltd said, There will be a range-bound movement in the gold prices till the festivities of Diwali. Considering the global economic uncertainty especially that is witnessed in European countries will bear implications on gold prices in coming months. According to him, the prices may remain range-bound between Rs.17,500 per 10 grams to Rs.19,500 per 10 grams in the Indian markets.
On Wednesday, spot Gold prices slipped sharply from its high of $1,227 per ounce as risk tolerance in the financial markets became low and investor confidence reduced. Overall, markets became risk averse as the financial services regulator of Germany announced a ban on naked short selling and naked credit-default swaps of euro-area government bonds.
The German move to sharpen financial regulation has raised fresh doubts amongst the investors about the prospect for global recovery. But despite this concern demand for gold as a safe-haven did not emerge as overall strength in the dollar capped gains in the yellow metal.
Spot Gold prices managed to close above its low yesterday as the dollar weakened in late trade. Weakness in the dollar was sparked by expectation of help from the European policymakers to protect the Euro.
Considering this, experts expect the dollar to strengthen with concerns over the Euro Zone debt crisis still persisting and leading to risk aversion in the financial markets and thereby increased demand for the low-yielding dollar. This strength in the dollar will cap gains in the yellow metal and ongoing issues and concerns over the Euro Zone also remain a bearish factor.