Gold unlikely to fall below Rs 25K

Gold prices may fall by Rs 2,000 from the present levels in the near to medium term as the precious metal is losing appeal as an asset, a report by industry body Assocham has said.

The report, however, said that gold is unlikely to fall below Rs 25,000 per 10 grams because of a strong buying support at that level and a weak rupee against the US dollar.

Gold prices have come down to Rs 27,790 per 10 grams in the national capital this month from the high of Rs 32,990 per 10 grams in April.

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"A fall of Rs 2,000 or little more from the present level looks plausible in the near to medium term," according to Assocham report on gold.

A likely drop in gold prices below Rs 25,000 per 10 grams will attract a strong buying support and may lead to April-like situation, when the downward spiral had made buyers rush to jewellers and banks for enriching their bullion collection, it said.

The Assocham paper contended that gold prices are unlikely to fall below Rs 25,000 per 10 grams for another reason, that is, continuous weakening of rupee against dollar.

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"Expensive dollar will push the gold prices in India even as they may decline in the international market.

"The country meets almost all its gold requirements through imports which will again become expensive as the rupee is likely to see more pressure in the coming days," it added.

The report titled 'Will Gold Retain its Lustre in 2013?' found that the main reasons for a runaway rise in gold prices in India was lack of investment avenues for the Indian middle and upper middle class.

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This is more so in the wake of inflation hovering around the double digit figure and investors were finding it difficult to save funds from the general price rise, it said.

On the other hand, the report said that most other avenues like property were out of the reach for the middle class investors and the equity market was dull.

In this context, the gold units had come in handy.

It found that the newly announced inflation indexed bonds will not fit the bill since the instruments have a long maturity period while the secondary bond market in the country has not developed for the retail investors.

India, the world's largest gold consumer, is expected to import around 900 tonnes in 2013.