Gold prices fall to Rs 1.57 lakh after seven-day rally.
- Gold rally ends: Gold prices in Delhi fell by Rs 2,800 to Rs 1,57,000 per 10 grams on Thursday, August 13, ending a seven-session winning streak. The decline followed a sharp recent rally that had pushed prices to record levels.
- Previous close: Gold of 99.9 per cent purity had closed at Rs 1,59,800 per 10 grams on Wednesday, August 12. The latest fall represents a significant pullback as traders moved to lock in profits after the extended rise.
- Silver also declines: Silver prices dropped by Rs 6,000 to Rs 2,40,000 per kilogram, including taxes, according to the All India Sarafa Association. The white metal had settled at Rs 2,46,000 per kg in the previous session.
- Profit booking drives fall: Analysts said the main reason behind the decline was profit booking. Investors had already factored in the expected impact of softer US inflation data into gold prices during the recent rally, leaving limited room for further immediate gains.
- US CPI data largely priced in: The much-awaited US July Consumer Price Index (CPI) data came broadly in line with market expectations. According to analysts, the outcome failed to provide a fresh catalyst for bullion prices after traders had already positioned themselves for softer inflation.
- Gold weaker internationally: The decline was also visible in international markets. Spot gold was trading around 0.43 per cent lower at USD 4,389.67 per ounce, while another overseas quote placed spot gold around USD 4,380 per ounce as investors booked profits.
- Silver also under pressure: International silver prices slipped marginally to around USD 65.03 per ounce. The weakness in both precious metals reflected a broader round of profit-taking following their recent gains.
- Why gold had rallied: Gold’s seven-session rally was largely supported by expectations that softer US inflation would encourage the Federal Reserve to reduce interest rates. Lower interest rates generally make non-yielding assets such as gold more attractive to investors.
- CPI fails to extend rally: Once the US inflation figures were released broadly in line with forecasts, much of the positive expectation had already been reflected in bullion prices. Traders therefore used the opportunity to book gains, resulting in a sharp correction in both gold and silver.
- Focus shifts to US PPI: Market participants are now turning their attention to the US Producer Price Index (PPI), which could provide additional clues about inflation and the Federal Reserve’s future policy direction.
- Cooler PPI could support gold: Analysts said a lower-than-expected PPI reading could strengthen expectations of a more relaxed Federal Reserve policy. Such an outcome could support precious metals by increasing expectations of interest-rate cuts.
- Hotter PPI could hurt bullion: On the other hand, a higher-than-expected PPI could revive concerns about persistent inflation. That could reduce expectations for rate cuts and encourage further selling in gold and silver.
- Dollar remains important: The US dollar index remained steady during the session. Movements in the dollar are closely watched by precious-metal traders because a stronger dollar can make gold more expensive for buyers holding other currencies.
- Hormuz adds uncertainty: Crude oil prices edged lower amid conflicting claims surrounding the Strait of Hormuz. Developments in the strategically important waterway continue to influence energy markets and broader investor sentiment.
- Interest-rate expectations remain key: Gold’s next major move is likely to depend heavily on expectations surrounding Federal Reserve policy. Any indication of lower interest rates could revive buying, while signs of persistent inflation may keep pressure on bullion.
- Indian market factors: For Indian buyers, domestic gold prices will also depend on movements in the rupee against the US dollar. Currency fluctuations can influence the local cost of internationally priced bullion.
- Festival demand could matter: Domestic demand ahead of the festival season may also influence prices. Strong physical buying could provide support if the current correction remains temporary.
- Correction or deeper decline: The immediate question for traders is whether the latest fall represents a short-term pause after a strong rally or the beginning of a deeper correction. The upcoming US PPI data could provide an important signal.
- Analysts remain watchful: With the CPI trigger now behind the market, investors are waiting for fresh economic data to determine the next direction. Profit booking may continue if no new bullish catalyst emerges.
- Key takeaway: Gold’s fall to Rs 1.57 lakh per 10 grams marks a sharp reversal after seven consecutive sessions of gains. The decline was primarily driven by profit booking after softer US inflation expectations were already reflected in prices. Future movements will depend on US PPI data, Federal Reserve rate expectations, the dollar, crude oil developments and Indian demand.
- Outlook: A softer inflation environment and expectations of interest-rate cuts could revive gold’s upward momentum. However, stronger inflation data, a firmer dollar or continued profit-taking could keep prices under pressure in the near term.