Gold prices in India and globally stepped back from their recent historic peaks on Monday, as market participants decided to cash in on gains and geopolitical worries showed signs of easing. This shift in sentiment led to a notable correction in the precious metal, which has been on a stellar rally throughout the year.
Sharp Decline in Domestic and International Markets
In the international markets, the spot gold price witnessed a significant drop of 1.9%, settling at $4,448.23 per ounce. Mirroring this trend, the actively traded U.S. gold futures contract for February delivery also declined by 1.9% to $4,467.90.
The pullback was equally pronounced in the Indian market. On the Multi Commodity Exchange (MCX), gold futures contracts retreated sharply. The prices fell by 1.4%, which translates to a drop of nearly ₹2,000. This brought the price down to approximately ₹137,900 for every 10 grams.
Key Drivers Behind the Price Correction
Analysts point to two primary factors for Monday's decline. First, investors chose to lock in profits after the metal's spectacular run to all-time highs. Second, the demand for safe-haven assets softened slightly after comments from former US President Donald Trump. On Sunday, Trump indicated that discussions with Ukrainian President Volodymyr Zelenskiy were "getting a lot closer" to a potential agreement to end the ongoing conflict, reducing immediate避险需求.
Despite this single-day setback, the broader narrative for gold in 2024 remains strongly positive. The yellow metal has still surged by an impressive about 80% this year. This monumental rally has been fueled by a combination of expectations for easier monetary policy from the U.S. Federal Reserve, a weaker U.S. dollar, persistent geopolitical tensions in various regions, and robust buying by central banks worldwide.
Expert View and Near-Term Outlook
Commenting on the price action and outlook, Jateen Trivedi, VP Research Analyst - Commodity and Currency at LKP Securities, stated that gold is expected to remain volatile in the near term. He provided a specific range, forecasting prices to fluctuate between ₹1,35,000 and ₹1,42,000 per 10 grams on the domestic front.
All Eyes on Federal Reserve Minutes
The market's immediate focus now turns to the release of the Federal Reserve's December meeting minutes. Investors and traders will scrutinize the document for further clues regarding the future path of interest rates in the United States. Current market pricing indicates expectations for two rate cuts in the coming year. Such a scenario is generally favorable for non-yielding assets like gold, as lower interest rates reduce the opportunity cost of holding the metal.
While the day's trading brought a breather for buyers, the fundamental drivers for gold's long-term appeal appear intact. The interplay between central bank policies, currency movements, and global uncertainty will continue to dictate the trajectory of gold prices in the sessions ahead.
