In fact, spot gold ended with (-)6 per cent returns in 2015 and around (-)8.5 per cent CAGR for 2013-15. A major factor to this fall in gold values is the strengthening of USD.

“The dollar is at its strongest in 10 years and is getting stronger as the rest of the world currencies are turning weak. The US central bank has moved towards tightening the monetary policy after almost nine years and there is a high chance that they will continue to hike rates in 2016. This would lead to an increase in demand for dollar and pressure on prices of correlated commodities such as gold, silver, oil and copper,” said Rathi.

The other contributing factor is the combination of falling demand for gold in India, the largest gold importer and the recently launched gold monetization scheme by the government.

“The gold monetization scheme of the current government by which they plan to recycle existing private holding of gold, will cut India's gold imports substantially. Indian household savings too are moving away from gold to financial instruments like fixed deposits, bonds, equity etc on the backdrop of improved economic growth and negative returns by gold in last three years. The savings in financial instruments have increased from roughly 35 per cent to upwards of 40 per cent in the last two years,” says Rathi.

Adding to this pile is the fact that major global economies are in a deflationary mode which rules out the possibility of introducing inflation in few months from hence. Gold is an inflation hedge and hence the desire to hold gold is expected to be subdued, remarks Amit Rathi.