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The recent surge in gold prices, marked by a continuous stream of record highs, has experienced a temporary pause as investors engage in profit-taking. This phenomenon, observed on Thursday, follows a period of exceptional gains for the yellow metal. Despite this momentary setback, the underlying sentiment towards gold remains decidedly bullish, fueled by a confluence of factors that reinforce its status as a safe-haven asset. These factors include the persistent weakness of the US dollar, the looming uncertainty surrounding potential tariff impositions by the Trump administration, and the growing likelihood of an economic slowdown in both China and the United States, two of the world's largest economies. The gold price on MCX has surged by over 24%, an increase of Rs 18,600 per 10 grams, in 2025 alone. As of approximately 2 pm today, June MCX gold contracts were trading at Rs 95,185 per 10 grams, reflecting a decrease of Rs 476 or 0.50% compared to the Wednesday closing price. Notably, the contracts had previously reached a lifetime high of Rs 95,935 in the preceding session. This volatility underscores the dynamic nature of the gold market and the interplay of various economic forces that influence its price movements.
Manav Modi, a Senior Analyst specializing in Commodity Research at Motilal Oswal Financial Services, attributes the extension of gold prices' record run, which saw them breach the $3,300 per troy ounce mark, to a weakening dollar and escalating trade tensions between the United States and China. These geopolitical and economic factors have collectively propelled investors towards gold as a secure store of value, offering a refuge from the perceived risks associated with other asset classes. The current trading levels reflect this sentiment, with gold trading around $3,337 on the Comex, experiencing a decrease of $8.80 or 0.26% compared to the last closing price. This movement coincides with minor gains in the dollar index (DXY), which was hovering near the 99.52 mark against a basket of six major currencies, increasing by 0.14 points or 0.14%. Despite this short-term rebound, the dollar index has experienced a decline of 1.3% over the past five sessions and a more significant drop of 4.2% on a monthly basis, indicating a broader trend of dollar weakness that supports gold prices. The inverse relationship between the dollar and gold is a well-established principle in financial markets, as a weaker dollar typically makes gold more attractive to international investors, thereby increasing demand and driving up prices. Conversely, a stronger dollar tends to exert downward pressure on gold prices.
In contrast to gold's relatively modest correction, silver has experienced more pronounced selling pressure, resulting in a decline of Rs 1,316 or 1.4% to trade at Rs 94,934 per kg. On the COMEX, silver was down by $0.515 per troy ounce or 1.56% to $32.46. This divergence in performance between gold and silver may reflect differences in their industrial demand, as silver is more widely used in industrial applications than gold. A slowdown in economic activity, particularly in manufacturing sectors, could therefore disproportionately affect silver prices. Anuj Gupta, Head of Commodity & Currency at HDFC Securities, holds a bullish outlook on gold and provides specific recommendations for investors. He suggests buying June gold futures at Rs 94,950 with a stop loss of Rs 94,600 and a target of Rs 95,520. For silver, he recommends buying May futures at Rs 94,800 with a stop loss of Rs 94,080 and a target price of Rs 95,980. These recommendations are based on his assessment of market conditions and technical analysis, offering investors specific entry and exit points for potential trades. However, it is important to note that these are merely suggestions, and investors should conduct their own due diligence and consider their individual risk tolerance before making any investment decisions.
Modi reiterates that bullion continues to receive significant support from a broadly weaker dollar, uncertainty surrounding tariff announcements, and concerns about a potential growth slowdown. Furthermore, he highlights the potential impact of Federal Reserve Chair Jerome Powell's recent remarks, which hinted at a slowing US economy and a modest increase in consumer spending. According to Modi, these factors could serve as a positive catalyst for gold prices. Powell's comments suggest a more cautious approach by the Federal Reserve regarding future interest rate hikes, which could further weaken the dollar and increase the appeal of gold as an alternative investment. In addition to the aforementioned factors, it is crucial to consider the broader macroeconomic environment and the evolving geopolitical landscape when assessing the outlook for gold prices. Factors such as inflation, interest rates, currency fluctuations, and political instability can all have a significant impact on the demand for gold and its price performance. Investors should remain vigilant and closely monitor these developments to make informed investment decisions. The article also mentions a related piece titled 'Gold rush 2025: Yellow metal prices soar by Rs 18,000/10 gram this year. Check 4 reasons fueling this rally & outlook'. This suggests that the current rally in gold prices is part of a broader trend that has been driven by a combination of factors, including safe-haven demand, inflation concerns, and currency fluctuations.
Source: Gold's bling run halts on profit booking. Should you buy the dip or wait for more corrections?