Will Gold Prices Drop Further or Are They Likely to Rise?
The future of gold prices remains a topic of ongoing discussion. While the immediate outlook suggests a potential downward trend, careful analysis indicates that gold's overall value may not be significantly affected. Several economic factors, including inflation and interest rate hikes, are likely to influence short-term fluctuations in gold prices.
Short-Term Erosion with Long-Term Stability
Over the coming days and weeks, there is a possibility that gold prices may marginally drop by 2 to 6 percent. However, this decline is unlikely to affect the intrinsic value of gold. In fact, by future days, there is a strong likelihood of a price hike.
Factors Influencing Gold Prices
One of the key factors influencing gold prices is the Federal Reserve's (Fed) decision to raise interest rates. The probability of a 25 basis point increase is high, which will likely move investors away from non-yielding assets like gold. Higher interest rates make government bonds more attractive because they offer higher returns and are considered safer options compared to equities or other commodities. This shift in investment preferences will result in capital being withdrawn from commodities and equities.
Gold Prices and Economic Trends
Despite the potential short-term decline, it's important to note that gold prices have a habit of fluctuating. As a result, it is wise for those considering purchasing gold jewelry to buy now while prices are lower, as one can never predict when prices might rise again.
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Global Trends and Future Predictions
The global market trend of gold over the past few years has been quite dramatic. In just under two years, gold prices rose by nearly 80 to 90 percent. While such rapid increases are often followed by periods of retracement, the extent and duration of this correction are uncertain. Key factors could include the development and rollout of coronavirus vaccines, particularly those in Russia.
As other countries release their vaccines, the global recovery could lead to a 20 to 50 percent retracement to levels seen in 2018. However, it's crucial to note that the price differences between international and Indian gold can vary, but they are not entirely separate.
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