Will gold prices drop?

After a rally in gold that led to the international prices zooming to $1030 an ounce, will gold price reverse direction based on Wednesday's price level of $940?

Major Ajay, a financial astrologer who predicted a week ago that a "vertical fall in bullions and metals are expected from March 19" has been proved true. "My prediction has indeed come true," he told Commodity Online. He said silver will follow gold whose support levels are at US $980-965 upto March 25. 

Last week Tobias Merath, head of commodity research at Credit Suisse in Zurich, said that the combination of dollar weakness, negative real interest rates and surging inflation was the ideal environment for rising gold prices.

However, he had warned that the gold price rally was entering a more mature phase and further sharp price rice is unlikely as has happened the earlier months.

The latest surge in gold prices, however, is less impressive when adjusted for inflation. In real terms, bullion would need to be about $2,200 to match the price achieved in 1980 of $850 a troy ounce, according World Gold Council.

Gold tumbled nearly 6 percent to a three-week low on Wednesday, as investors rushed to take profits after a lower-than-expected U.S. interest rate cut and as the dollar trimmed losses.

International analysts are of the view that the dips in gold prices are temporary and it could come back to above $1000 levels soon and sustain at that level. The increasing threat of inflation, lower interest rates which makes dollar less attractive and several key drivers of gold prices are still there.