Gold rates see biggest weekly drop in 3 years. Good time to buy?

Despite the fall in prices, analysts remain bullish about the yellow metal's long-term potential. Here is all you need to know.

In Short

• Gold prices record sharpest weekly drop in three years
• Stronger US dollar diminishes gold’s safe-haven appeal globally
• Bitcoin rally also diverts investor interest away from precious metals

Gold prices faced their sharpest weekly drop in over three years, driven by a stronger US dollar and changing investor preferences.

Spot gold ended the week at $2,562.61 per ounce, down more than 4%, while US gold futures dropped 0.2% to $2,567.10. In India, 10 grams of 24-carat gold in Delhi slipped by Rs 1,200 to Rs 75,813 on Friday.

The decline comes after Federal Reserve Chair Jerome Powell signalled a more cautious approach to interest rate cuts, highlighting the need to avoid hasty decisions. His comments have shifted market sentiment, reducing the likelihood of a rate cut in December to 59% from 83% a day earlier, according to CME's FedWatch tool.

A stronger dollar has added to gold’s challenges, making the metal more expensive for investors holding other currencies. The dollar is poised for its largest weekly gain in over a month, while US Treasury yields have extended their rise, further diminishing gold’s appeal. Higher interest rates typically discourage investment in non-yielding assets like gold.

Adding to the pressure, US retail sales data exceeded expectations in October, signalling resilience in the economy. This has bolstered the case for a slower pace of rate cuts and reduced gold’s safe-haven allure.

GOOD TIME TO BUY GOLD?

Rahul Kalantri, Vice President of Commodities at Mehta Equities, attributed the drop in gold prices to the dollar’s surge and shifting investor interest toward cryptocurrencies.

He added that Bitcoin’s record-breaking rally to $93,000 per coin has drawn attention away from traditional safe-haven assets like gold.

Jateen Trivedi, VP of Research at LKP Securities, added that gold’s weakness below $2,550 was compounded by the dollar index climbing above 106.50. He noted that the unexpected inflation reading raises concerns that the Fed may pause rate cuts, exerting additional pressure on gold.

Despite the fall in prices, analysts remain bullish about the yellow metal's long-term potential. The current market dip could be an opportunity for investors to accumulate gold.

However, it is also important to note that with rising interest rates and stabilising inflation, short-term gains may remain limited.

(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.)