Indian stocks and currency markets are worried about the possibility of the rate high by the US Federal Reserve.

India Rating and Research, a domestic rating agency has warned about a drastic crash in the gold prices if the interest rates are hiked by the US Federal Reserve.

"In the event of a US rate hike, global gold prices could drop and range between $900/oz to $1,050/oz... they will possibly settle at around $1,000/oz. As such, the domestic price of gold may decline and range between Rs 20,500/10gm to Rs 24,000/10gm," India Ratings and Research said in a report.

The current gold prices in India are around Rs 27,000 per 10 grams and if the predicted rate turns true, then the prices would fall by Rs. 20,500 per 10 grams, which is almost 24 per cent lesser than the actual prices.   

The reason behind this is, a rate hike in the US will cause the dollar to strengthen against other currencies. Especially the commodities such as gold, priced in US dollars, will face a tough time, as they will become costlier in other currencies.

Further, investors will move away from safe haven assets such as gold and buy interest fetching bonds if rates rise in the world's largest economy.

On the other side, if the US central bank keeps on delaying the rate hike and quantitative easing (QE) continues in Japan and eurozone, the gold prices are expected to go up to Rs. 29500 per 10g to Rs.30500 per 10g

However, the International Monetary Fund (IMF) has urged the US central bank not to hike policy rate "until the first half of 2016."

By Phani