Gold's Wild Ride: From Hitting Record High To Snapping Nine-Week Winning Streak. What's Next?
Gold prices shot to its highest-ever on Monday, but subsequently faced a steep plunge.
Global gold prices endured a turbulent week, witnessing their highest tip and the sharpest sell-off in over a decade. US spot gold declined 1.64% on Friday to trade almost flat at $4,128 an ounce.
The metal is set to snap its nine-week winning streak, despite peaking to an all-time high of $4,381.58 per ounce on Monday. It is set to close with around 3% weekly decline, as per the rates that stood at the time of publishing this report.
The slump was triggered by a dramatic 6.3% single-day plunge on Tuesday, the steepest fall since 2013, coming just after the metal hit a record high.
On India's Multi Commodity Exchange, gold futures dropped 0.19% on Friday to trade at Rs 1,23,868 per 10 gram. During the week, it reached a high of 130,749. However, the decline in the subsequent days positions the metal's for a weekly decline of about 2.5%.
Despite the recent correction, gold still remains up by more than 50% so far this year.
Analysts attribute the slide this week to a shift in sentiment as hopes of progress in the US–China trade negotiations reduced the appeal of safe-haven assets. A stronger US dollar further weighed on gold prices, as the metal is denominated in the American currency.
What's Next For Gold?
According to Kotak Securities, spot gold faces immediate resistance at $4,151. If it breaks through this, the next set of resistance is seen at $4,179 and $4,273.
On the other hand, if the metal slips in the period ahead, then the immediate support lies at $4,057, followed by $4,029 and $3,935.
On the MCX, resistance is pegged at Rs 1,24,525, after which it could reach Rs 1,25,314 and Rs 1,27,866. On the other hand, support is expected at Rs 1,18,364, then at Rs 1,21,186 and Rs 1,21,974 levels.
ICICI Securities noted that gold has taken a breather after becoming overbought, following a rally of more than 60% this year. The brokerage expects “healthy consolidation” in the $4,400–$3,900 range going forward.
Jateen Trivedi, vice president and research analyst for Commodities and Currencies at LKP Securities, said gold prices have corrected as investors booked profits amid optimism over trade discussions with India and China.
“The ongoing US government shutdown and uncertainty around trade negotiations are likely to keep sentiment cautious. In the near term, gold prices may remain volatile within the Rs 1,18,000–Rs 1,25,500 range, with a slightly negative bias until greater clarity emerges,” he said.
Factors To Impact Gold Prices In The Coming Week
Optimism Over US–China Trade Deal
Darshan Desai, chief executive officer of Aspect Bullion & Refinery, observed that gold is set to break its nine-week winning streak following a sharp correction from recent highs.
“Investors are booking profits amid stretched valuations and renewed optimism over a potential US–China trade deal, coupled with a stronger dollar," Desai added.
Rahul Kalantri, vice president for commodities at Mehta Equities Ltd, said gold prices showed early signs of recovery after the steepest single-day fall in more than six years.
He also explained that the rebound in gold that was seen earlier this week was only due to the rising tensions between the US and China.
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Trump-Xi Meeting
The market will now also focus on the upcoming meeting between US President Donald Trump and Chinese President Xi Jinping. "A successful trade agreement could put further downward pressure on gold, while any escalation in US–Russia tensions or sanctions may lend support at lower levels,” Desai added.
Fresh Sanctions On Russia
Amid the already rising tensions globally, the US announced fresh sanctions on two of Russia’s largest oil producers, Rosneft and Lukoil. This will also impact the prices of gold as investors could move towards safe-heaven assets.
US CPI
“Investors are also positioning ahead of potential Federal Reserve rate cuts, with markets now pricing in two reductions by year-end. The US CPI data will be crucial in shaping monetary policy and bullion demand,” Kalantri noted.
Gold, being a non-yielding asset, typically rises when the prospects of a low-interest environment grows.
Despite this week’s slide, analysts broadly agree that gold’s long-term trajectory remains influenced by global macroeconomic uncertainty, central bank policy expectations, and evolving geopolitical developments.
