BackWhy are gold prices falling? Now, down ₹6,000 from record highs
Gold prices in India today fell below ₹50,000 per 10 gramAnalysts attribute the recent fall in gold prices to a resurgent dollar and uncertainty over US stimulus package
PremiumGold prices in India today fell below key psychological level of ₹50,000 per 10 gram, extending losses to the third day in a row amid a slump in global rates. On MCX, gold futures hit ₹49,660 at day's low. Silver futures were down about ₹3% to ₹59,429 per kg. Despite the recent fall gold is up about 26% so far this year, making it one of the best asset classes this year.
Analysts attribute the recent fall in gold prices to a resurgent dollar and uncertainty over US stimulus package. In fact, gold is down over ₹6,000 per 10 gram as compared to its record highs of ₹56,200, hit on August 7th this year.
"The primary reason for the fall in gold prices is the rally in the dollar index, uncertainty over the next stimulus package by the US government. As gold is an international commodity and a rally in the US dollar affects its prices. Further stimulus is crucial as the Fed chairman in its testimony to Congress said that more government spending will be required to sustain the growth rate," said Nish Bhatt, Founder & CEO, Millwood Kane International.
"Going forward, clarity on fiscal stimulus in the US, control on the number of COVID cases worldwide, or a vaccine will guide gold prices," he said.
In global markets, gold slid today to a six-week low, with spot prices dipping to $1,887.35 per ounce.
Analysts also said that the break below $1,900 sparked some nervousness and short-selling in the market.
Positive U.S. economic data and concerns over surging coronavirus infections in Europe and Britain pushed the dollar index to an eight-week high, dimming the appeal of bullion as a dollar alternative.
Non-yielding gold is often seen as a hedge against inflation and currency weakening.
In global markets, silver fell 3.3% to $23.62 per ounce, having hit a nearly two-month low of $23.04 earlier in the session.
Analysts also attribute the recent correction in gold to profit-taking after its strong run this year. "The rally in gold prices was so steep that it overshot its fundamentals and investors took some money off the table which led to correction. Such volatility is normal when the market becomes too much one sided and even a small event will trigger a large sell-off," domestic brokerage said in a note. (With Agency inputs)
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