Gold prices fall for 2nd consecutive week: What's the reason?
What's the story
Gold prices have witnessed a downward trend for the second consecutive week. The decline is attributed to an improved global risk appetite, a stronger US dollar, and the US Federal Reserve's cautious stance on further rate cuts. On the Multi Commodity Exchange (MCX), December gold futures plunged ₹2,219 or 1.8% in the last week.
Market dynamics
Gold witnessed a major correction
The yellow metal witnessed an intra-day low of ₹1,17,628 per 10g on October 28. Both global and domestic markets witnessed a major correction early in the week, ending a nine-week rally. This was due to easing geopolitical tensions, a stronger US dollar, and profit-booking by investors. "Heavy profit-booking pushed global gold down from recent highs to test the $1,900 an ounce level," said Sneha Jain of WealthTrust Capital Services.
Currency impact
US dollar's strength impacts gold prices
The strength of the US dollar also played a role in gold's decline. Jain explained, "The US dollar Index surged... after the Fed's comments, making dollar-priced gold more expensive for foreign buyers and triggering selling." Rising bond yields earlier in the week also made non-yielding bullion less attractive. In international markets, Comex gold futures for December delivery fell by $141.3 or 3.41% during the week to settle at $1,996.5 per ounce on Friday.
Silver market
Silver futures experienced a larger crash
Silver, which outperformed gold in the recent rally, also witnessed major swings during the week. On the MCX, December silver futures ended a nearly two-week losing streak by rising ₹817 or 0.55%. Jain noted that "silver futures experienced a larger crash, falling from near ₹1,55,000 per kilogram to test ₹1,45,000 per kg before regaining some ground." In overseas markets too Comex silver futures remained largely flat over the past week at $24.16 per ounce.