Gold prices fell on Monday, November 25, after reaching a three-week high earlier in the trading session. The decline was attributed to profit-taking by investors and a reassessment of Federal Reserve interest rate expectations.
Spot gold dropped 0.6% to $2,695.79 per ounce by 0246 GMT, while U.S. gold futures declined by 0.5% to $2,697.90 per ounce. In India, gold prices hovered around ₹77,000 per 10 grams. Specifically, 24-carat gold was priced at ₹79,630 per 10 grams, and 22-carat gold stood at ₹72,990 per 10 grams.
Factors Behind the Decline in Gold Prices
Gold’s recent price movements have been influenced by a combination of profit-taking, changing interest rate expectations, and broader economic factors.
Profit-Taking After Rally
Following last week’s rally, which pushed gold futures to their highest levels since the pandemic, many investors opted to secure gains. Matt Simpson, Senior Analyst at City Index, noted, “Some traders wanted to book profits around the $2,718 per ounce high, contributing to the current pullback.”
Shifting Interest Rate Expectations
U.S. interest rate expectations also played a critical role in gold’s decline. The likelihood of a 25-basis-point rate cut by the Federal Reserve in December has fallen to 51%, down from 62% the previous week, according to market data.
Rising Treasury yields and a stronger U.S. dollar have added further pressure on gold, which is a non-yielding asset. Higher interest rates generally make gold less attractive compared to yield-bearing investments.
Gold as a Safe-Haven: Geopolitical Risks Remain
Despite recent profit-taking, gold continues to benefit from its status as a safe-haven asset amid ongoing geopolitical tensions. The protracted Russia-Ukraine conflict, now entering its third year, remains a significant factor influencing the bullion market.
Renisha Chainani, Head of Research at Augmont – Gold For All, emphasized, “The Russia-Ukraine war has exceeded 1,000 days and continues to impact gold prices. Last week’s renewed tensions between the two countries triggered safe-haven flows into gold and silver.”
However, Chainani warned that this surge might be temporary. “I anticipate impending buying exhaustion this week. The missile launches linked to Russia’s actions boosted prices unexpectedly, but this trend may reverse soon. Profit-booking and consolidation are likely as prices have surged too far, too fast.”
Key Support Levels and Investment Strategies
Investors are closely watching key support levels to gauge future price movements. Chainani pointed out that gold’s 50-day moving average (DMA) is around $2,650 per ounce (approximately ₹75,500 per 10 grams). She added, “As long as gold prices stay above $2,550 per ounce (₹73,700 per 10 grams), the uptrend remains intact. Dip-buying is likely to continue as long as these support levels hold.”
For Indian investors, gold’s support levels are pegged between ₹77,150 and ₹77,380 per 10 grams, with resistance levels between ₹77,850 and ₹78,040, according to Rahul Kalantri, Vice President of Commodities at Mehta Equities. “If prices remain above these support levels, we can expect a rebound,” he noted.
Future Outlook: Consolidation or Continued Uptrend?
Analysts suggest that while gold prices may consolidate in the short term, the overall uptrend remains intact, provided key support levels hold.
Jateen Trivedi, Vice President and Research Analyst at LKP Securities, believes that gold will trade within a range. “Gold is likely to fluctuate between ₹77,000 and ₹78,300 per 10 grams on the Multi Commodity Exchange (MCX). Volatility will remain elevated, influenced by global events and economic data releases.”
Trivedi added that geopolitical developments and Federal Reserve policy signals will be critical factors shaping gold’s trajectory in the coming weeks.
Should You Buy the Dip? Key Considerations for Investors
The decision to invest in gold at this point depends on an individual’s investment horizon and risk appetite.
Long-Term Safe-Haven Appeal
For those who view gold as a long-term safe-haven asset, especially amid global uncertainties, buying on dips may present a strategic opportunity. Current price levels around ₹77,000–₹77,500 per 10 grams could offer a favorable entry point.
Short-Term Caution Advised
However, caution is warranted for short-term investors. With profit-taking likely and geopolitical tensions creating market volatility, gold prices may experience further fluctuations. Analysts recommend waiting for dips to key support levels before making significant investments.
Renisha Chainani reiterated, “If you plan to buy gold, consider waiting for a correction to key support levels. This approach minimizes risk and increases the potential for gains.”
Conclusion: Weighing the Opportunities and Risks
Gold’s recent pullback from its three-week high highlights the complex interplay of factors influencing the market. While profit-taking and shifting interest rate expectations have applied downward pressure, ongoing geopolitical tensions continue to lend support to the precious metal.
Investors should carefully assess their risk tolerance and investment goals. For those with a long-term perspective, the current dip might be an opportunity to accumulate gold. However, short-term volatility and potential profit-booking suggest a cautious approach.
Monitoring key support and resistance levels will be crucial in navigating the market. As global events unfold and economic data releases shape Federal Reserve policy expectations, gold’s performance will remain closely watched by investors worldwide.
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