MCX Gold prices dip almost ₹6,000 from record high – Is this a buying opportunity ahead of the wedding season?

The recent dip in MCX gold rates has left investors contemplating the right move as the wedding season approaches. On November 15, gold futures on the Multi Commodity Exchange (MCX) fell by ₹870, settling at ₹73,612 per 10 grams, marking a significant decline from the record high of ₹79,535 set on October 30. This drop of almost ₹6,000 has been fueled by global headwinds, notably a stronger US dollar and elevated US Treasury yields.

Factors Weighing on Gold Prices

The international market has also witnessed a dip in spot gold prices, which recently slid below the $2,560 level. The global economic environment, marked by a firm US dollar and higher bond yields, has posed significant challenges to the yellow metal. The persistent strength of the dollar, driven by robust US economic data, has dampened demand for gold, which is priced in dollars, making it more expensive for buyers using other currencies.

Colin Shah, MD of Kama Jewelry, highlighted the current market landscape, stating, “We are currently in a low-interest regime, post two straight cuts announced by the US Fed, and the RBI is expected to cut rates next month. This could fuel a rally in gold prices further. As we are expected to be in a lower-for-longer interest rate regime, gold prices are expected to stay elevated. The geopolitical tensions are expected to support the yellow metal further.”

Potential Triggers Ahead

The focus now shifts to potential domestic and global triggers that could influence gold prices. One of the most significant upcoming factors is the Reserve Bank of India's (RBI) expected rate cut, which could provide a fresh boost to gold prices. Additionally, market participants are closely monitoring US economic data and shifts in the dollar index. Continued strength in the dollar and persistent high yields could exert further pressure on gold in the near term.

However, Shah maintains an optimistic long-term outlook for the precious metal. "We reiterate our view on the gold price trajectory. In the long term, gold prices will touch $3,000 globally and ₹86,000 in the domestic markets," he said, emphasizing the metal’s enduring appeal as a hedge against inflation and geopolitical uncertainty.

Expert Analysis and Technical Insights

Jateen Trivedi, VP Research Analyst at LKP Securities, noted the impact of stronger-than-expected US CPI data on gold prices. “Gold's weakness persisted with prices falling near ₹73,500 on the MCX as the dollar climbed and US CPI data came in higher than anticipated at 2.6 percent. This has raised concerns that further rate cuts by the Fed may be paused, adding pressure on gold prices.”

Sandip Raichura, CEO of PL Broking and Distribution, echoed similar sentiments, citing that while Asian buyers have remained net purchasers, North America has seen significant sell-offs in gold ETFs. The positive momentum in equities, particularly in North America, coupled with a rally in cryptocurrencies, has also detracted from gold’s safe-haven appeal.

Should You Buy Now?

The upcoming wedding season often drives a surge in demand for gold in India. With current prices having retreated significantly from their highs, investors may see this as an opportune moment to enter the market. The near-term outlook, however, remains clouded by global economic indicators and the strength of the dollar.

Pranav Mer, Vice President of Commodity & Currency Research at JM Financial Services, pointed out the technical landscape for gold. "Momentum looks corrective with resistance at ₹74,500 and ₹75,350, while support is seen at ₹73,400 and ₹72,580," he said, adding that upcoming US data and remarks from Federal Reserve officials could set the tone for future price movements.

While MCX gold prices have dipped significantly from their record highs, the decision to buy ahead of the wedding season should factor in both domestic and global cues. The expected rate cut by the RBI, persistent inflation concerns, and geopolitical developments could support prices in the medium to long term. As always, investors should weigh the potential risks and stay updated on economic trends that could influence gold's trajectory.

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 taking any investment decisions.