Gold prices have dropped over ₹4,000 from their record high amid profit booking and easing trade tensions. Learn if this dip is a buying opportunity or signals a deeper fall.
Sharp Decline in Gold Prices Globally and Domestically
On Tuesday, gold prices plunged more than 5%, marking the steepest single-day decline since August 2020. According to Reuters, this selloff was the worst in over five years, with spot gold dropping to $4,109.19 per ounce, down over 6% from its all-time high of $4,381.21 reached just a day before.
The domestic market was closed for Diwali on the last trading session, but a sharp selloff is expected when bullion trading resumes. The Multi Commodity Exchange (MCX) was also closed in the morning due to Diwali Balipratipada.
Reasons Behind the Gold Price Fall
Several factors have contributed to this correction after a record rally in gold prices. This year, gold has returned nearly 60%, outperforming many other asset classes, prompting some investors to book profits.
Further easing tensions in international trade relations have also played a significant role. Positive signals from US-China trade talks and potential agreements between India and the US have strengthened risk appetite among investors, reducing the safe-haven demand for gold.
US President Donald Trump expressed optimism about a fair trade deal with Chinese President Xi Jinping during their upcoming meeting in South Korea. Additionally, reports suggest that New Delhi and Washington are close to finalizing a trade agreement that could reduce US tariffs on Indian goods from 50% to around 15-16%.
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Investors are now eagerly awaiting the release of the September US Consumer Price Index (CPI) report, which could influence the Federal Reserve’s stance on interest rates and further impact gold prices.
Expert Opinions on Gold’s Future Trend
Ross Maxwell, Global Strategy Lead at VT Markets, noted that the gold rally was fueled by a weak US dollar, expectations of lower Federal Reserve rates, strong central bank purchases, and geopolitical risks. However, he pointed out that profit-taking following the record surge was inevitable. Maxwell warned that sustaining prices near the critical $4,000–$4,400 per ounce range will be challenging, though the broader bullish factors remain intact.
Harshal Dasani, Business Head at INVAsset PMS, echoed a positive long-term outlook. He stated that we are currently in the “third supercycle” for precious metals, implying a prolonged period of growth despite short-term volatility.
Should Investors Buy or Wait?
This recent dip in gold prices could represent an opportunity for long-term investors to accumulate gold at relatively lower prices after a significant rally. However, cautious traders might prefer to wait for further confirmation on whether this is just a temporary correction or the beginning of a sustained downtrend.
With key economic data releases on the horizon and evolving geopolitical developments, gold investors should stay vigilant and consider both risks and rewards carefully before making decisions.
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