Gold gets cheaper before Dhanteras: Buy now or wait for a bigger dip?

As India gears up for Dhanteras and Diwali, the yellow metal is losing some of its shine on the price front. Is this the right time to buy jewellery, or could prices fall further?

In Short

• Gold prices eased recently, aiding festive and wedding season buyers
• MCX Gold traded at Rs 1,45,898 per 10 grams, down 0.42%
• Buyers advised to consider staged purchases and watch key support levels.

India has entered the festive season, with Karwa Chauth, Dhanteras and Diwali lined up, while the wedding season is also getting underway. For those planning to buy gold jewellery or invest in the yellow metal, there is some relief. Gold prices have eased over the past few days, offering buyers a chance to purchase the precious metal at lower levels.

On Wednesday, October 21, MCX Gold was trading at Rs 1,45,898 per 10 grams, down 0.42% at the time of writing around 11.30 am. MCX Silver was also under pressure, trading at Rs 2,09,028 per kg, down 1.16%.

The recent decline comes as rising crude oil prices have fuelled inflation concerns, while investors await the US Federal Reserve's policy meeting next week for clues about the future direction of interest rates.

But does this dip mean gold has become a good buy ahead of Dhanteras and Diwali? And could prices fall further, giving buyers a better opportunity to purchase jewellery?

WHY ARE GOLD PRICES FALLING?

Gold prices fell for a fourth consecutive session on Wednesday as higher oil prices raised concerns about inflation. Crude oil prices edged higher amid worries about supply disruptions in the Middle East, including risks to shipping routes in the Red Sea and threats to oil infrastructure in Saudi Arabia.

Higher oil prices can push up inflation, making the outlook for interest rates more uncertain. Investors are now watching the US Federal Reserve's next policy decision closely, as changes in interest rate expectations can influence gold prices.

WHAT SHOULD GOLD BUYERS WATCH NOW?

The recent correction may offer some relief to buyers preparing for festive purchases. However, experts caution that gold prices could remain under pressure in the near term, with technical indicators pointing to further weakness.

Ponmudi R, CEO of Enrich Money, said MCX Gold opened lower, near Rs 1,46,300, and was testing the support zone between Rs 1,45,300 and Rs 1,46,000.

“Immediate resistance is the Rs 1,48,000-1,48,600 zone, where Rs 1,48,000, previously support, now acts as resistance after Monday’s brief reclaim failed. The next resistance zone is Rs 1,50,000-1,50,700,” he said.

On the downside, Ponmudi identified the Rs 1,43,000-1,43,700 range as the next important support zone.

He also pointed to signs of weakness in technical indicators. The Relative Strength Index (RSI), which measures the strength of price movements, was near 40 and below its signal line. Meanwhile, the MACD indicator's negative histogram was widening, suggesting that downward momentum was increasing.

These signals indicate that gold could remain under pressure unless prices recover and move above the immediate resistance levels.

WILL GOLD PRICES FALL FURTHER?

The possibility of another decline cannot be ruled out, particularly if crude oil prices remain elevated and inflation concerns persist. The coming US Federal Reserve meeting could also influence the direction of gold prices.

Aamir Makda, Commodity and Currency Analyst – Technical Research at Choice Broking, said gold had resumed trading on a flat note at Rs 1,46,328 but was likely to remain negative for another session.

“Higher crude oil prices has elevated inflation concerns. Also, investors looked ahead to next week's Federal Reserve policy meeting for clues on the future path of interest rates,” he said.

Makda noted that gold had found support around its 200-day Exponential Moving Average (DEMA), a technical indicator used to track longer-term price trends, which was placed at Rs 1,45,861.

He identified Rs 1,47,415-1,47,900 as the key resistance range.

“Breakout below support level will accelerate downside momentum in gold price and traders should look for sell-on-rise opportunity in today’s session,” he said.

In simple terms, a sustained fall below the support level could put further pressure on gold prices. However, if prices hold above this level and recover, the decline could lose momentum.

SHOULD YOU BUY GOLD NOW OR WAIT FOR A BIGGER DIP?

For those planning to buy jewellery for Dhanteras, Diwali or an upcoming wedding, the recent fall may provide some relief. However, a short-term decline does not necessarily mean gold has reached its lowest level.

Ponmudi's assessment suggests that buyers should watch the Rs 1,45,300-1,46,000 support zone closely. If prices break below this range, the next support area is between Rs 1,43,000 and Rs 1,43,700. On the other hand, a recovery above Rs 1,48,000-1,48,600 would indicate that gold is facing buying interest at higher levels.

Those purchasing jewellery for an upcoming occasion may consider buying in stages rather than waiting for the perfect price. This approach can reduce the risk of having to make the entire purchase if prices rise again. Buyers with more flexibility may watch how prices behave around the identified support levels before making a decision.

It is also important to remember that MCX prices are not the same as the final price paid at a jewellery shop. Retail gold prices vary by city and purity, while making charges, the applicable GST and other invoice components affect the final bill.

For those buying gold as an investment rather than for an immediate occasion, the decision should depend on their investment horizon and overall asset allocation, not just a few days of price movements.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)

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