Gold and silver prices have recently experienced a significant downturn, surprising investors and consumers alike. Gold, in particular, saw its value drop for the first time in ten weeks, triggering concerns across the market. This decline is attributed to a confluence of factors, including profit-booking by investors, subdued demand in major markets like India and China, and the persistent strengthening of the US dollar, while market experts suggest that pressure on both precious metals may continue into the coming week, even as the long-term prospects for these commodities appear strong.
Key Drivers Behind the Recent Price Drop
A primary reason for the recent slump is the widespread profit-booking by investors. Following a period of sustained price appreciation, many investors opted to cash in on their gains, leading to increased selling pressure in the market. Simultaneously, demand in major gold-consuming nations like India and China has remained weak. Indian buyers are reportedly holding off purchases, anticipating further price reductions, while lower prices have spurred some buying in China and Singapore. The strengthening US dollar has also played a crucial role, making dollar-denominated gold more expensive for international buyers.
Market Outlook for the Upcoming Week
According to experts, domestic gold prices might stabilize to some extent next week, but they will likely remain under pressure. Investors are keenly observing upcoming meetings of major central banks, especially the US Federal Reserve's interest rate policy decisions and statements from Fed Chairman Jerome Powell. These announcements are expected to have a direct impact on global markets and the dollar's trajectory, which in turn will influence gold prices, while pranav Mer, Vice President at JM Financial, stated in a PTI report that "Gold prices recently fell for the first time in ten weeks, due to profit-booking by investors, weak demand in India and China, and a strong US dollar.
Expert Opinions and Technical Factors
Prathamesh Mallya of Angel One attributed the gold decline to profit-booking and improving signals from US-China trade talks. Riya Singh, Research Analyst at MKA Global Financial Services, highlighted that gold experienced its sharpest weekly decline in a decade, falling over six percent. She explained this was primarily due to technical factors, as prices failed to sustain above $4,300 per ounce. Singh further noted that optimism surrounding US-China trade negotiations and a stronger dollar limited investment in gold.
Long-Term Outlook for Gold
Despite the recent dip, Riya Singh emphasized that the long-term outlook for gold remains strong. Factors such as the US budgetary deficit, central banks diversifying away from the dollar, and ongoing geopolitical risks are expected to continue supporting gold as a safe-haven asset, while these elements collectively contribute to gold's appeal during times of economic and political uncertainty, suggesting a stable or appreciating value over an extended period.
Silver Market Performance
Mirroring gold's trajectory, silver also experienced a decline after a recent rally. On MCX, December delivery silver futures dropped by Rs 9,134 (5. 83 percent), and in the international market, silver fell by 3, while 02 percent. However, similar to gold, silver's long-term outlook is also considered strong. Riya Singh pointed out that demand for silver is consistently increasing in burgeoning industries such as solar energy and electric vehicles. This growing industrial demand is anticipated to provide strong support for silver prices. In the future, indicating potential for sustained value or growth over the long run.
