Gold Prices Slide 6% Amid Stronger Dollar and US Inflation Concerns

New Delhi (The Uttam Hindu): Gold prices have experienced a notable decline of approximately 6% since Diwali, driven by the strengthening US dollar and heightened concerns over inflation data from the United States. The price of 24-carat gold per 10 grams, which was Rs 80,710 on November 1, has dropped to Rs 75,920 as of Saturday. This sharp correction underscores the impact of global economic pressures on commodity markets.

Jateen Trivedi, Vice President and Research Analyst for Commodity and Currency at LKP Securities, explained the factors behind the drop, stating, “Gold’s weakness persisted as prices fell below USD 2,550 and hovered near Rs 73,500 on MCX. This was primarily due to the dollar climbing above 106.50 and nearing 107. Additionally, US CPI data, which came in at 2.6% compared to the expected 2.4%, further strengthened the dollar.” The higher-than-expected US inflation rate has fueled speculation about a possible shift in the Federal Reserve's monetary policy. While the Fed had been signaling rate cuts as inflation neared its 2% target, the recent CPI data has raised concerns about a potential pause in these cuts.

Trivedi noted, “This development has added pressure on gold prices, which have reacted negatively to the stronger dollar and the uncertainty around the Fed’s policy trajectory.” The decline in gold prices follows a prolonged rally earlier this year, during which the precious metal reached record highs. Analysts attribute the recent dip to robust US economic data, which has strengthened the dollar and reduced gold's appeal as a safe-haven asset. Looking ahead, market experts believe that gold's performance will hinge on forthcoming economic indicators and announcements from the Federal Reserve. They advise traders and investors to closely monitor global cues amid the ongoing volatility in the precious metals market.

Despite the downturn, the current dip presents an attractive opportunity for buyers, particularly during India’s ongoing wedding season. Dhruv Malhotra, Managing Director of Malhotra Jewels, emphasized gold’s cultural and investment significance in India, saying, “Gold is an integral part of Indian weddings. Regardless of short-term price fluctuations, people continue to purchase it as a long-term asset. With 24-carat gold now priced around Rs 75,000, this is an ideal moment for buyers to take advantage of the decline.” Malhotra also noted that the price drop has been a boon for jewelers, driving increased demand during the high-consumption wedding season. “For jewelers, demand remains consistent whether prices rise or fall. However, a significant drop like this triggers a surge in buying, particularly during wedding preparations,” he added. The combination of global economic factors and seasonal demand makes this a pivotal moment for the gold market, with both buyers and sellers capitalizing on the changing dynamics.