Synopsis:
Gold prices dropped sharply amid fading US rate cut hopes and easing trade tensions, raising questions about recession fears. Silver also fell as the dollar strengthened; investors await key US economic data.
Gold prices have dropped sharply this week, sending ripples through markets and sparking fresh debate about the global economy. Investors are watching closely as the yellow metal’s fall raises questions: is a recession still on the cards, or has the worst been avoided? The latest data shows gold and silver prices tumbling more than 6% in Indian market, with global cues pointing to a changing outlook.
Gold’s Sudden Slide
Gold prices fell by 6.1% to Rs. 1,24,191 per 10 grams on the MCX since Oct 17 high. Silver also dropped 9.54% to Rs. 1,54,151 per kg. The decline comes as hopes for a US Federal Reserve rate cut in December have faded. At the same time, easing concerns over US tariffs have reduced the appeal of gold as a safe-haven asset.
The dollar’s strength has also played a role. As the US dollar index rose to 100.08, gold became more expensive for buyers using other currencies. This further weakened demand for the precious metal. International gold prices have been falling for the last one week in a row, reflecting a broader global trend.
Why the Recession Fears Are Fading
For months, investors bought gold as a hedge against a looming recession. But recent signals from the US Federal Reserve have changed the mood. Fed officials now suggest that interest rates may stay higher for longer. Vice Chair Philip Jefferson said the central bank should proceed slowly with further cuts. This has dampened expectations for a December rate cut.
The US government shutdown, which lasted 43 days, delayed key economic data. Now that the shutdown is over, markets are waiting for fresh US jobs and inflation numbers. These will shape the Fed’s next move. Until then, uncertainty remains, but the immediate risk of a recession appears to be receding.
What Experts Are Saying
Rahul Kalantri, VP of commodities at Mehta Equities, noted that gold and silver are still trading at historically high levels. “With no major positive triggers, bulls remain hesitant,” he said. Traders are now focused on upcoming US economic data, which could shift sentiment again.
Jigar Trivedi, Senior Research Analyst at Reliance Securities, expects MCX gold to fall further to Rs. 1,22,000 – Rs. 1,21,700 per 10 grams. Aksha Kamboj, Vice President of the India Bullion and Jewellers Association, said the dip is part of recent volatility. Demand for gold is adjusting ahead of the wedding season, but global cues remain steady, she added.
What This Means for Investors
The current correction presents a potential buying opportunity for long-term investors. Gold’s role as an inflation hedge remains strong, especially with US inflation at 3%. However, short-term risks persist until the Fed’s policy becomes clearer. Experts advise monitoring key support levels for gold and silver.
For now, the market is in a wait-and-see mode. The next big move could come after the release of US jobs data later this week. Until then, investors should stay cautious and watch for fresh signals from the Fed and global markets.
Written By Fazal Ul Vahab C H
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