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The recent decline in gold prices across Hyderabad and other major Indian cities, along with the global market, is a significant development with complex underlying factors. The drop, initiated after the release of the U.S. presidential election results, has seen prices fall by more than 4 percent over the past week. In Hyderabad specifically, the price of 22-carat gold has dropped by Rs 3,200, reaching Rs 70,450 per 10 grams, while 24-carat gold has declined by Rs 3,500 to Rs 76,850 per 10 grams.
Several factors contribute to this downward trend. The strengthening U.S. dollar, which has recently risen to a four-month high, plays a significant role. When the dollar strengthens, gold becomes less attractive to investors holding other currencies, as they need to exchange more of their currency to buy the same amount of gold. This diminished demand consequently leads to a decline in gold prices.
Furthermore, rising inflation concerns add to the pressure on gold prices. Although gold is often considered a safe haven asset during inflationary periods, higher interest rates can dampen investor enthusiasm for gold. This is because gold is a non-yielding asset, meaning it doesn't pay dividends or interest. As interest rates rise, investors may shift their capital towards assets that offer higher returns, further impacting gold prices.
The future trajectory of gold prices remains uncertain, dependent on a confluence of factors. The geopolitical situation, including ongoing global conflicts and economic sanctions, will play a pivotal role in shaping investor sentiment towards gold. Additionally, the U.S. economic data, such as inflation figures and interest rate decisions by the Federal Reserve, will significantly impact gold prices.
If inflation remains persistent or even accelerates, gold could see increased demand as a hedge against inflation. Conversely, if inflation subsides, interest rates rise, and the U.S. dollar continues to strengthen, gold prices are likely to remain under pressure. Therefore, closely monitoring these macroeconomic factors will be crucial for predicting the future direction of gold prices.
Source: Gold rates take huge dip in Hyderabad, fall over 4 pc in 7 days