Gold prices down 4% in a week: What's the reason?
What's the story
Gold prices continued their downward trend, falling 2.55% to $4,176 per ounce in intraday trading today. The decline is a steep 4.44% from last week's peak of $4,370 per ounce on September 22. US gold futures for December delivery also witnessed a similar decline of 2.48%, trading at $4,213.90 per ounce during the same period.
Domestic market
Gold futures on MCX fall over 2%
In the domestic market, gold futures for December 4 delivery on MCX fell by 2.22% to ₹1,49,875 per 10g today.
The fall in prices comes amid rising inflation concerns and a strong dollar.
Brent crude oil has also surged past $107 per barrel, further putting pressure on gold prices as investors are forced to choose between holding cash or investing in non-yielding assets like gold.
Market dynamics
Rajodiya explains why gold is under pressure
The rise in US Treasury yields has further increased the opportunity cost of holding non-yielding assets like gold.
Markets are now pricing in a 68% chance of an October Federal Reserve rate hike, which is also adding to the pressure on precious metals.
Ashish Rajodiya, Head - Commodities at PL Capital, said, "Elevated crude prices, rather than boosting gold's safe-haven appeal as they typically would during geopolitical stress, are instead reinforcing the case for further Fed tightening."
Future outlook
Gold may trade in these ranges
Rajodiya predicts gold has support at ₹1,48,000 and ₹1,46,000 with resistance at ₹1,52,500 and ₹1,55,000.
He said, "The metal's next move likely hinges on two threads converging at once: The Fed's October rate decision and whether the recent signs of renewed US-Iran diplomatic engagement on Hormuz firm up into an actual de-escalation."