Gold prices dip 6% amid stronger Dollar and US inflation concerns

Gold prices have witnessed a significant decline of around 6 per cent since Diwali, driven by a stronger dollar and concerns over US inflation data. The rate of 24-carat gold per 10 grams, which stood at Rs80,710 on November 1, dropped to Rs75,920 on Saturday. This sharp correction reflects ongoing global economic pressures influencing commodity markets.

Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities, highlighted the factors behind the price drop, stating, "Gold's weakness persisted with prices falling below USD 2,550 and near Rs73,500 on MCX as the dollar climbed above 106.50 and edged closer to 107. The US CPI data, which came in higher at 2.6 per cent compared to the expected 2.4 per cent, fueled the dollar's strength."

The uptick in US inflation has sparked speculation about a potential shift in the Federal Reserve's monetary policy. While the Fed has been pursuing rate cuts as inflation approached its 2 per cent target, the higher-than-expected CPI reading has raised concerns that further cuts may be paused.

Trivedi noted, "This development added pressure on gold prices, which reacted negatively to the stronger dollar and the potential shift in Fed policy."

The ongoing correction in gold prices comes after a prolonged rally earlier this year, which saw the precious metal hit record highs.

Analysts attribute the recent dip to a combination of robust economic data from the US and the resulting resilience in the dollar, making gold less attractive as a safe-haven asset.

Looking ahead, market experts suggest that gold's trajectory will depend on upcoming economic indicators and Federal Reserve announcements. Traders and investors are advised to monitor global cues closely as uncertainty looms over the precious metals market.

Despite the drop, market experts see this as an opportunity for buyers, particularly during India's ongoing wedding season. Dhruv Malhotra, Managing Director of Malhotra Jewels, highlighted the cultural and investment appeal of gold in the Indian market.

Malhotra said, "Gold remains an integral part of Indian weddings. Irrespective of this short-term fall, people continue to buy it as a long-term asset. The current price of around Rs75,000 for 24-carat gold makes this the perfect moment for buyers to take advantage of the dip."

Malhotra added that the drop in prices is also a boon for jewellers, as the sudden decline has boosted demand during the high-consumption wedding season.

"For jewellers, demand always remains strong, whether prices go up or down. But a drop like this creates a surge in buying activity, especially during wedding preparations," he remarked.