After a nearly two-month streak of consistent increases, gold and silver prices are displaying initial signs of weakness. Both precious metals experienced slight declines in early trading on Friday, as profit-taking emerged following a period of record-breaking growth.
This drop coincides with a global improvement in risk sentiment, a strengthening US dollar, and a shift in investor sentiment away from safe-haven assets. The recent correction follows a notable nine-week period for bullion, driven by concerns over inflation, expectations of interest rate cuts, and geopolitical uncertainties.
Despite global bond yields easing and central banks accumulating gold reserves, the rally appears to be losing steam due to overextended valuations and a firmer dollar index. On the Multi Commodity Exchange (MCX), December gold futures were trading near Rs 1.23 lakh per 10 grams, while silver was around Rs 1.47 lakh per kg in early Friday trade.
Industry experts suggest that this movement might signal the end of the metals’ immediate upward trend, although it may not necessarily mark the conclusion of the broader bull market cycle. Darshan Desai, CEO of Aspect Bullion & Refinery, noted that gold prices are poised to break their nine-week winning streak following a significant drop from recent highs.
Desai attributed the decline to investors cashing in profits due to stretched valuations, positive expectations regarding a potential US-China trade deal, and a stronger US dollar. Looking ahead, market focus will shift towards upcoming data releases and geopolitical events, including the US Consumer Price Index (CPI), the US government shutdown status, and the scheduled meeting between Presidents Trump and Xi Jinping next week.
Rahul Kalantri, VP Commodities at Mehta Equities Ltd, highlighted that gold prices are attempting a modest recovery after experiencing their most substantial single-day decline in over six years. This rebound is supported by ongoing US-China trade tensions and fresh geopolitical risks resulting from sanctions on Russia.
Kalantri also pointed out that traders are positioning themselves ahead of anticipated Federal Reserve rate cuts, with markets pricing in two reductions by year-end. He outlined technical levels for gold and silver, indicating support and resistance levels for both in Indian rupee terms.
For investors, the upcoming sessions will be critical. A lower-than-expected US CPI print could reignite hopes of accelerated rate cuts, propelling gold higher. However, if inflation remains stubborn and the dollar continues to strengthen, gold could face further downward pressure. Overall, while the shine on gold hasn’t dimmed completely, it is undergoing a testing phase. The bullion market rally, following a period of rapid growth, is now cooling off, prompting cautious observation to determine whether this pause will evolve into a more substantial correction or simply a healthy pause within a longer-term uptrend.