The gold considered as the safe haven and a hedge against inflation has shown a downward trend since last week. Though investors responded to the Fed’s unexpectedly refrained decision of reducing the pace of monthly bond purchases, it has again rallied down and is moving towards the bearish trend. As seen by the historical charts, gold and dollar shows a negative correlation, the current US economy showed improving status with reduced unemployment claims, inflation near a targeted level, and GDP showing positive signs besides negative BOP.

Where will the gold prices be in the next few months? Will it rise or fall? Investors are now initiating sell positions. Still, the bullish investors in gold are on a hope of rise in gold prices in the future. It is to be seen in the coming future. In the present context, the last year’s biggest gold consumer, India, has halted the gold imports by 2/3rd to reduce its current account deficit which had ballooned in the current year of USD 88 billion i.e. 4.8% of the GDP for the fiscal year ended March 31.

The week long US economic indicators showed a mixed result. The industrial production increased in the U.S. in the past six months with more cars, appliances and home furnishings in August. Output at factories, mines and utilities rose by 0.4 percent. The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in August. Applications for unemployment benefits climbed by 15,000 to 309,000 in the week ended Sept. 14 from a revised 294,000 in the prior period. The U.S. current-account deficit decreased to $98.9 billion in the second quarter from $104.9 billion in the first quarter. Also, the existing home sales showed a rise by 1.7% in August to the highest level in more than six years. The most awaited and impactful news- ‘Septaper’ was refrained and reduction in $85 billion assets purchases was delayed. This depreciated the USD and had shown a rise in gold prices by 4.1% and gradually rallied down by 3% on September 20.

The emerging market China, is taking a lead on the improved economy supported by its Purchasing Managers’ Index, a manufacturing gauge, which increased to 51.2 as compared to 50.1 in August. Chinese gold investors have helped push the demand for bars and coins up by a significant 157% this quarter as it was the second largest gold consumer last year. The improving Chinese economy is likely to increase the demand for bullion but will it be a significant increase in demand or not is yet to be seen.