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The Indian gold market experienced a significant downturn on Monday, with prices plummeting by a considerable amount. The All India Sarafa Association reported a decrease of Rs 1,150 per 10 grams, bringing the price of 24-karat gold down to Rs 78,350. This marked a sharp decline from Friday's closing price of Rs 79,500. The drop is primarily attributed to extensive selling by stockists and retailers, indicating a shift in market sentiment. Simultaneously, silver also suffered a price reduction, falling by Rs 300 per kg to Rs 92,500. This follows a larger drop of Rs 4,500 over the previous two trading sessions, further highlighting the bearish trend in precious metals. The decline in 99.5 per cent purity gold mirrored the drop in 24-karat gold, falling by the same Rs 1,150 to Rs 77,950 per 10 grams.
Market analysts have pointed to several factors contributing to this negative sentiment. Uncertainty surrounding the economic policies of the incoming US administration is cited as a major influence. The potential for a strengthening US dollar, often a negative factor for gold prices denominated in other currencies, is a primary concern. This uncertainty is creating volatility, leading investors to adopt a more cautious approach. This is reflected in the mixed signals from the futures markets. While MCX gold futures for February delivery showed a slight increase of Rs 143 (0.19 per cent) to Rs 77,279 per 10 grams, the spot market demonstrated a far more pronounced decline. This discrepancy underscores the complex interplay of factors influencing gold pricing, with both domestic and international markets reacting differently to the prevailing economic climate.
The volatility in the precious metals market is further emphasized by contrasting opinions from market experts. Jateen Trivedi, VP Research Analyst at LKP Securities, noted that gold traded within a volatile range, mirroring the up-and-down swings seen in the previous week. He suggests that the market is bracing itself for a series of significant economic events scheduled for the upcoming week, contributing to the uncertainty. Conversely, Saumil Gandhi, senior analyst at HDFC Securities, highlighted the ongoing geopolitical tensions in the Middle East, particularly the recent Israeli military operations in Gaza, as a factor supporting gold's value, acting as a safe haven asset. This underscores the conflicting forces at play, with geopolitical risks potentially offsetting the negative impact of economic uncertainty.
Looking ahead, the forecast for gold prices remains uncertain. Pranav Mer, Vice President at JM Financial Services, suggests that prices are likely to stabilize in the short term, possibly undergoing consolidation before reacting to key central bank policy meetings. The Federal Reserve meeting on Wednesday, followed by meetings from the Bank of Japan and the Bank of England on Thursday, and finally the People's Bank of China on Friday, are all expected to significantly impact market sentiment. These events could trigger significant shifts in the prices of gold and other commodities. The World Gold Council's forecast anticipates a moderation in price increases in 2025, following this year's record performance. The council points to a likely moderation in growth and inflation as factors contributing to this projected slowdown in price increases.
The simultaneous decline in both gold and silver prices suggests a broader trend in the precious metals market, reflecting investor sentiment and broader economic factors. The discrepancy between spot and futures prices highlights the complexities of the market, with various influences pushing and pulling the price in different directions. The upcoming central bank meetings and ongoing geopolitical instability promise to keep the market volatile in the near future. Investors and traders will need to carefully monitor these developments to navigate the uncertain market conditions.
Source: Gold prices decline by Rs 1,150 to Rs 78,350 per 10 grams