Gold prices fell for a third straight session on Thursday as profit-booking and rebounding of U.S. dollar overtook the precious metal’s surge to fall drastically.
In India, 24-carat gold faced a sharp fall trading around rupees 1,25,080 per 10 grams in major cities which is down from its recent surge of rupees 1.31 lakh.
This pullback comes after a massive bull run, in which gold surged to all-time highs powered by robust safe-haven demand. Today's fall in price is majorly for those investors who wanted to cash-in the gains.
Key market drivers
Spot gold was $4,085 an ounce internationally, slightly down from the historic peak of more than $4,300 which reached last week.
It is being driven by multiple dynamics:
Profit-booking: Following such an abrupt surge, a technical correction was inevitable as traders and short-term investors locked in profits.
Stronger U.S. dollar: The dollar index is up as gold, priced in USD, becomes pricier for those holding other currencies.
Easing of geopolitical and trade tensions: Positive news on U.S.-China trade talks as well as some relief elsewhere in the world have reduced the attraction of gold as a “safe-haven”. Investors are hungry for riskier assets once again.
Domestic demand cooling down: In India, the strong physical demand witnessed during the Dhanteras and Diwali celebrations has slowed down, erasing a significant pillar of support for local prices.
Market Outlook
While market sentiment is bearish, many analysts regard it as a short-term consolidation rather than a long-term trend reversal. The market is currently in a “wait-and-see” mode and all are waiting for the U.S. consumer price index (CPI) figures report. The inflation data are scheduled for release on Friday, and are likely to weigh heavily on the Federal Reserve’s next move on interest rates.
Though the present gold market scenario may seem to be bearish in nature, the long-term bullish case stays intact, supported by Fed rate cuts and steady buying of gold by the central banks.
