Global gold prices were volatile on Wednesday, remaining below the $4100-per-ounce mark after clocking a 6 per cent decline on Tuesday, its sharpest fall in the last five years amid profit booking.
Jewellers expressed hope that a pullback in prices bodes well for wedding season jewellery sales. At the same time, analysts remain cautious on near-term volatility following a sharp rally in the prices of the precious metal.
At the Comex, gold prices were down 0.58 per cent at $4,085.20 per ounce as of 11.30 pm, Indian time. In Calcutta, gold prices were down ₹2,700 at ₹1,25,400 per 10 grams on Wednesday from ₹1,28,100 on Monday.
Silver prices at Comex also remained below $50 per ounce, at $47.8, up 0.21 per cent as of 11.30 pm, Indian time. In Calcutta, silver prices were down ₹7,950 at ₹1,57,950 on Wednesday from ₹1,65,900 on Monday.
Analysts at Citi Research said the gold rally before the current dip “appears significantly stretched”, requiring investors to carefully risk-manage long gold positions as the asset may be vulnerable to a pullback in the near term.
“We think gold is really quite stretched and the rally probably has at some stage to at least pause,” said Dirk Willer, global head of macro strategy and asset allocation, in a podcast.
“The sell-off in gold is driven by heavy profit-taking following strong rallies. The strengthening of the US dollar added to the downward pressure on precious metals. The safe-haven demand eased amid improving global market sentiments. Markets continue to price in a 25 basis points Fed rate cut next week with another possible cut in December,” said Rahul Kalantri, vice-president, commodities, Mehta Equities.
“Despite the correction, both metals remain significantly higher year-to-date, supported by Fed easing expectations and lingering safe-haven demand,” he said.
Over the past year, gold has rallied from $2,733 per ounce to over $4,300 per ounce, clocking a growth of around 58 per cent. Silver saw a rally from around $34 per ounce to over $53 per ounce in a one year period, growing by 56 per cent.
“After a strong rally, a correction in prices is a healthy sign. Even after the correction, gold prices are still below their recent highs. For the jewellery buyers, it’s a great opportunity, especially with the wedding season coming up. Fundamentally, there has not been much change as there are still a few global factors which will require solutions for prices to stabilise,” said Suvankar Sen, MD and CEO, Senco Gold Ltd.
“The investors perceive this as an opportunity and take the ‘buy the dip’ approach to book their profits, using gold as a hedge against inflation. Consumers, on the other hand, can leverage this softening of prices to buy jewellery for occasions like weddings. This rate correction is a positive approach for both classes of buyers, and while internationally the trend may differ, Indian gold-buying thrives on such occasions,” said Colin Shah, managing director, Kama Jewelry.
