Gold Prices Tumble: Market Adjusts Amidst Strong Dollar and Inflation Concerns

Gold prices have dropped significantly by around 6% since Diwali, influenced by a rising dollar and US inflation concerns. The price per 10 grams of 24-carat gold fell from Rs80,710 to Rs75,920, reflecting global economic pressures. Analysts predict market trends will depend on upcoming indicators and Fed announcements.

In a striking shift, gold prices have experienced a notable decline of approximately 6% since Diwali, primarily due to a robust dollar and apprehensions regarding US inflation data. The rate for 24-carat gold per 10 grams, which was Rs80,710 on November 1, has now decreased to Rs75,920 as of Saturday. This decline underscores the persistent global economic pressures that are impacting commodity markets.

Jateen Trivedi, VP Research Analyst - Commodity and Currency at LKP Securities, elaborated on the reasons for the price drop. He stated, "Gold's weakness continued as prices fell below USD 2,550 and approached Rs73,500 on MCX, coinciding with the dollar's rise above 106.50, nearing 107. The higher-than-expected US CPI data, recorded at 2.6% compared to the anticipated 2.4%, strengthened the dollar." This uptick in US inflation has led to speculation around potential shifts in the Federal Reserve's monetary policy, as future rate cuts may be halted due to the inflation figures.

Trivedi further noted, "This scenario has exerted additional pressure on gold prices, which have responded negatively to the stronger dollar and the potential change in Fed policy." The current correction in gold prices follows a period of extended gains earlier in the year, when the precious metal reached record levels. Analysts attribute the recent fall to solid economic data from the US and the durability of the dollar, which diminishes gold's appeal as a safe-haven asset. Looking forward, market analysts suggest that gold's future depends on forthcoming economic indicators and Federal Reserve statements, advising traders to pay close attention to global developments as uncertainty persists in the precious metals market.

Despite the decline, market experts view this situation as advantageous for buyers, especially during India's wedding season. Dhruv Malhotra, Managing Director of Malhotra Jewels, emphasized gold's cultural and investment significance in India. Malhotra remarked, "Gold is an essential component of Indian weddings. Despite this temporary downturn, people continue to purchase it as a long-term investment. The current price point of around Rs75,000 for 24-carat gold is an ideal opportunity for buyers to capitalize on the dip."

Malhotra also highlighted that the price drop benefits jewellers, as the decrease has spurred demand in the high-spending wedding season. He observed, "For jewellers, demand remains strong irrespective of price fluctuations. However, a decline like this results in increased purchasing activity, particularly during wedding preparations."

(With inputs from agencies.)