Gold has always been a focal point of investment and cultural significance, particularly in India. After witnessing a remarkable surge earlier this month, the yellow metal has now found itself in a corrective phase. As of now, Gold December futures are trading around Rs 1.21 lakh per 10 grams on the Multi Commodity Exchange (MCX), while silver prices have also seen a downturn, dropping significantly to Rs 1.43 lakh per kg.
### Understanding the Recent Price Rally
Gold prices skyrocketed from nearly Rs 75,000 to over Rs 1.30 lakh in just a few months, creating waves of excitement in the market. This astronomic rise prompted analysts to predict that a correction was not just likely but necessary. Experts unanimously agree that a retracement of about 10-15% was overdue, which would take prices closer to the Rs 1.15 lakh mark per 10 grams.
Mahendra Luniya, Chairman of Vighnaharta Gold Ltd, emphasized the importance of this correction, stating, “After gold prices surged sharply, a correction in the market was both expected and necessary.” The anticipated price adjustment, between Rs 13,000 to Rs 19,500, is viewed as a natural evolution in response to recent market dynamics.
### Demand Remains Strong
Despite this recent pullback, the demand for gold shows remarkable resilience. Industry experts report ongoing buyer interest, particularly during the auspicious periods of Dussehra and the approaching Diwali and wedding season. Jewellers across the country have noted steady foot traffic, suggesting that consumers are not shying away from purchasing gold, even at elevated prices.
Luniya also pointed out that the investor sentiment towards gold remains robust. The crossing of the Rs 1 lakh threshold has made many individuals realize the value of investing in gold—be it through jewellery, coins, or digital formats. Should prices dip further, the expectation is that gold buying in India will accelerate.
### Global Factors Influencing the Market
On a broader scale, global sentiment is also shifting. The ongoing US government shutdown, which has now extended beyond 27 days, coupled with uncertainty surrounding Donald Trump’s political standing, has caused some turbulence in investor confidence. Luniya explained that these circumstances are likely putting pressure on the US Federal Reserve to consider cutting interest rates. A reduction in rates could reignite gold demand.
“With these global dynamics in play, I do not foresee gold prices in India falling below Rs 1.15 lakh per 10 grams,” Luniya stated, reinforcing the view that the current dip is an adjustment rather than a significant downward trend.
### Technical Analysis and Market Sentiment
The recent drop in gold prices, which saw a staggering decline of more than 6% in a single day—the steepest in over a decade—was influenced by varying factors. A stronger US dollar, profit booking after the record rally, and dwindling physical demand in Asia all factored into this correction.
Dr. Renisha Chainani, Head of Research at Augmont, noted, “The dramatic reversal is linked to speculative positioning tied to worries about fiscal weakness and anticipation of further rate cuts by the Fed.” Despite the sharp fall, the consensus remains that the overall outlook for gold retains an optimistic flare.
While gold took a breather, silver has mirrored this trend but with sharper declines. Analysts report a correction of about 9%, driven primarily by traders locking in gains from recent highs. The combination of rising US bond yields and easing supply concerns has also somewhat dampened sentiment towards silver.
Chainani remarked, “Silver’s correction was sharper due to increased profit-taking after its big rise earlier this month. However, its long-term fundamentals remain strong, bolstered by industrial demand from the electric vehicle and solar sectors.”
### Price Consolidation and Future Expectations
Looking forward, gold prices are expected to stabilize between Rs 1.20 lakh and Rs 1.24 lakh per 10 grams in the near term, with the potential for movement of another 3-4% depending on market conditions. Silver, on the other hand, has a strong support zone at Rs 1.44 lakh per kg and a resistance level at Rs 1.50 lakh that traders should keep an eye on.
For retail buyers, this correction could be an opportune moment for investment, particularly with the wedding season fast approaching. Even a minor dip could trigger a renewed wave of shopping as consumers rush to make purchases ahead of traditional celebrations.
As the market continues to navigate these fluctuations, one thing remains clear: gold retains its luster in times of uncertainty, and its value as a safeguard against market volatility is more evident than ever.
