- Gold prices fell below $4,200 an ounce amid a stronger US dollar and rising yields
- Gold dropped nearly 25% from its January peak above $5,500 an ounce internationally
- Correction driven by inflation, stronger dollar, higher rates, and unwinding leveraged bets
Gold's steep correction from its 2026 record high has prompted investors to reassess whether the selloff offers a buying opportunity or signals further downside ahead.
The precious metal extended losses on Friday, with international prices slipping below $4,200 an ounce as a stronger US dollar and rising Treasury yields weighed on bullion demand. The decline follows the Federal Reserve's hawkish stance, with policymakers signalling support for at least one rate hike this year, raising the opportunity cost of holding non-yielding assets such as gold.
Gold has now fallen almost 25% from its January peak above $5,500 an ounce, while MCX August gold futures dropped over 1% to around Rs 1,47,756 per 10 grams.
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According to Sachin Sawrikar, Managing Partner at Artha Bharat Investment Managers IFSC LLP, the correction has been driven by a combination of inflation concerns linked to the oil shock, a stronger dollar, higher-for-longer interest rates and the unwinding of leveraged positions.
"These are cyclical pressures rather than signs of a structural breakdown," Sawrikar said, adding that the longer-term investment case for gold remains supported by elevated sovereign debt levels, continued central bank purchases and concerns around the durability of reserve currencies.
While analysts caution against calling a definitive bottom, they say investors with a long-term horizon may view the correction as an opportunity to reassess allocations to precious metals.
"Whether this is the entry point or there's more downside, nobody knows. But investors with a five-year horizon and no allocation to precious metals should at least be asking the question," he said.
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From a technical perspective, Kotak Securities sees key support for MCX Gold August futures at Rs 1,51,792, followed by Rs 1,51,236 and Rs 1,49,438 per 10 grams. On the upside, immediate resistance is placed at Rs 1,53,590, with higher hurdles at Rs 1,54,146 and Rs 1,55,944.
Despite the near-term pressure from a hawkish Fed and firm dollar, analysts say resilient physical demand, central bank buying and geopolitical uncertainties could help cushion further declines in gold prices.
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