Gold prices in India extended decline on Thursday, mirroring global weakness in the yellow metal after Republican Donald Trump’s 2024 US election victory triggered a sharp correction. Analysts anticipate further short-term pressure on gold rates due to political and economic factors impacting the bullion's safe-haven appeal.
MCX gold prices have dropped over 4%, or around ₹3,400 per 10 grams, from their record high, while silver has corrected 10%, or around ₹10,000 per kg, from its peak in late October. International gold, which reached a record high of $2,790.15 last week, has since lost over $120.
“Gold remains overbought after a three-month rally and this correction was due. A spike in US dollar after Trump’s election win, expectations of a slower interest rate cut trajectory by the US Federal Reserve, easing geopolitical tensions in the Middle East and year-end profit booking have all contributed to the correction in gold prices,” said Ajay Kedia, Director, Kedia Advisory.
Kedia expects this correction to continue going ahead in the short-term due to confluence of economic and political factors.
Investors will focus on the US Federal Reserve policy meeting and interest rate decision today. Traders anticipate a 25-basis-point Fed rate cut later in the day, with the focus on Chair Jerome Powell’s commentary for guidance on future rate cuts.
Trump’s victory has fuelled questions about whether the Fed may proceed to cut rates at a slower and smaller pace. The prospect of several US rate cuts has underpinned gold’s record rally this year.
Kedia noted that higher gold prices have slowed physical buying in India, with increased barter trade and old gold reentering the market. Moreover, with Trump’s victory, Bitcoin and equities rallied, leading to profit-booking pressure on gold amid shifting investment focus.
“Historically, we have seen that US election results in the past have led to short-term correction in gold prices. Meanwhile, the gold-copper ratio is also falling, which indicates easing uncertainty in the markets. Year-end profit booking and portfolio restructuring will also weigh on bullion prices. Hence, we expect gold rates to continue the decline for a couple of months going ahead,” Kedia said.
According to him, MCX gold rate may fall to ₹74,000 - 74,500 levels and MCX silver prices may drop to ₹87,000 - 88,000 in 1-2 months from here.
Sandip Raichura, CEO - Retail Broking and Distribution, Director - PL Broking and Distribution noted that gold plunged by more than $125 in the last 24 hours to trade at around $2,670, very close to its 50 DMA of around $2,653.
“With the USD gaining strength, Gold – being inversely related, is bound to fall and therefore the Fed meeting today holds great importance as to the future direction of bonds and the dollar. On the one hand the pre-election rhetoric points to yields hardening in the US, growth and incremental data is unlikely to change the trajectory that the central banks wish to take and will act as a counter. Hence a bit of bumpiness is expected in the next 2-3 weeks and maybe right upto the President elect assuming office in January,” said Raichura.
According to him, gold as of now remains on an uptrend but he reiterates tight stops are necessary especially if the pivots around $2,600 are challenged as that would mark a significant break. Till then, he anticipates that the initial kneejerk reaction on the USD may reverse especially if President Trump talks around higher deficits that could put pressure on the USD.
Here’s a look at how gold prices have performed under various US Presidents since 2000.
Historical trends indicate that gold prices typically experience a short-term correction following US election results but tend to rally in the long term. Data reveals that over the last six presidential terms, gold prices have delivered positive returns in five of them.
The above table shows data compiled by Kedia Advisory, illustrating the historical movement of gold prices since 2000 across US presidential terms. It compares gold prices from the start of each election month to the end of the term or just before the next election. Over these terms:
- Gold prices showed a positive increase in five of the six terms.
- The highest increase occurred during Barack Obama’s first term (2008-2012), with a 137.13% rise.
- The only decline was during Obama’s second term (2012-2016), where gold prices dropped by 29.97%.
- Other terms saw steady increases, with returns ranging from around 46% to 60%, reflecting gold’s tendency to perform well under different political environments over the long term.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
