Following a significant surge that propelled gold to all-time highs earlier this month, the precious metal is currently undergoing a period of consolidation. Gold December futures are hovering around Rs 1.21 lakh per 10 grams, while silver has declined to Rs 1.43 lakh per kg on the Multi Commodity Exchange (MCX) after a notable drop in the past week.
Market analysts anticipated and viewed the recent decline as a necessary correction following the rapid escalation of gold prices from approximately Rs 75,000 to Rs 1.30 lakh within a short span. A correction of around 10-15% was predicted to bring prices closer to Rs 1.15 lakh per 10 grams.
Commenting on this market movement, Mahendra Luniya, Chairman of Vighnaharta Gold Ltd, stated, “Given the substantial increase in gold prices from about Rs 75,000 to over Rs 1.30 lakh, a market correction was expected and deemed essential. Ideally, this correction should range between 10-15%, potentially leading to a decrease of about Rs 13,000 to Rs 19,500, aligning prices closer to Rs 1.15 lakh per 10 grams.”
Despite the pullback, the demand for gold remains robust. Industry experts observe that buyers have continued their interest even at these elevated levels. Jewelers have reported steady foot traffic during the Dussehra festival and anticipate increased buying if prices further ease before Diwali and the upcoming wedding season.
Luniya further emphasized the strong investor sentiment towards gold, stating, “Once prices surpassed the Rs 1 lakh mark, individuals recognized the value of investing in gold. Whether through jewelry, coins, or digital platforms, the demand has shown resilience. If prices experience a slight decline from current levels, gold purchases in India are likely to accelerate further.”
On a global scale, sentiments have also shifted. The ongoing US government shutdown, now exceeding 27 days, coupled with uncertainty surrounding Donald Trump’s political influence, have impacted investor confidence.
“These developments are expected to exert pressure on the US Federal Reserve to decrease interest rates,” noted Luniya. “If rate cuts occur, gold demand could see a resurgence. Given these international dynamics, it is unlikely that gold prices in India will drop below Rs 1.15 lakh per 10 grams.”
Simultaneously, a stronger US dollar and profit-taking following the record rally have contributed to the decline. Analysts highlighted that the drop, exceeding 6% in a single day last week, marked the most significant decrease in over a decade.
Dr. Renisha Chainani, Head of Research at Augmont, explained, “The stronger US dollar, declining physical demand in Asia, and profit-taking at recent highs all played a role in the lower gold prices after ten consecutive weeks of increases. This rapid turnaround stems from months of speculative positioning related to concerns about fiscal weakness and expectations of further rate cuts by the Federal Reserve. Despite the sharp decline, the overall outlook for gold remains positive.”
However, market observers generally view this as a temporary pause rather than a complete reversal.
Silver has followed a similar trajectory to gold but with more pronounced declines. Prices have corrected by approximately 9% as traders locked in profits following recent highs. Higher US bond yields and alleviated supply concerns have also influenced sentiment.
Chainani remarked, “Silver’s correction was sharper due to increased profit-taking after its substantial rise earlier this month. Nonetheless, its long-term fundamentals remain solid, supported by industrial demand from the electric vehicle and solar sectors.”
Technically, gold