Gold price dips over 2.5% in November; Russia-Ukraine escalations, wedding season might aid bullish movement

The gold rates in India have been on an exciting ride this year. The price of the yellow metal touched its all-time high, crossing ₹80,000 per 10 gm 24K gold, during the Diwali season. Notably, gold prices have increased almost 30% year-over-year (YoY) since Diwali 2023. Even with the dramatic highs in gold prices seen this month, the precious metal closed in red, down by over 2.5%, in November 2024.

Gold prices in India on Friday, November 29, ended at nearly ₹77,800 per 10 gm 24K gold and around ₹71,333 per 10 gm 22K gold.

While gold prices have been on the rise in the last two weeks, making their best weekly performance last Friday, November 23 by rising 5% to ₹77,700 per 10 gm of 24K gold, the overall trend this month has shown a decrease.

What impacts gold prices in India?

The change in Multi Commodity Exchange of India (MCX) gold rates is impacted by several factors including geopolitical situation, domestic demand and currency rates. Gold prices observe an upward trend generally when people start to lose confidence in currencies and turn to the yellow metal for a safer investment. Similarly, when the geopolitical situation sees an improvement, gold prices make a u-turn to settle down lower.

Why have gold prices dipped in November?

As per media reports, the ceasefire agreement between Israel and Hezbollah and a stronger US dollar as compared to other currencies led to an overall decrease in gold prices in the month of November.

An ease in geopolitical tensions like a ceasefire removes the risk premium associated with gold, which is the value investors expect to be added to gold due to global uncertainty, causing prices to fall. Additionally, as gold is priced in US dollars, a stronger dollar also leads to a decrease in prices as individuals turn to other more profitable investments.

"After a three-month rally, gold prices posted a decline of 2.60% for the month at the domestic markets, erasing some of the geopolitical risk premium. This pullback was largely driven by the announcement of a ceasefire agreement between Israel and Hezbollah and the broader strength in the US Dollar Index following Donald Trump's victory in the US Presidential elections”, Live Mint quoted Sugandha Sachdeva, Founder of SS WealthStreet.

With the US Fed meeting scheduled in December, experts are waiting on the decision on rates as any cuts can mean an increase in gold prices. However, recent US economic data has shown a growth trend in the economy and inflation has been observed as relatively stable as well.

Geopolitical uncertainty and wedding season in India

The gold prices, even with an overall fall in November, have been seeing a rise in the second half of the month as global tensions have been escalating once again. With Ukraine’s recent attack on Russian territory, its first-ever strike, and Donald Trump’s return to the White House, market volatility and geopolitical uncertainty have once again given a green signal to gold prices. Russian President Vladimir Putin’s warning, citing the possibility of targeting Ukraine with nuclear-capable ballistic missiles, and speculations around new US tariffs have provided the yellow metal with a bullish trend as December approaches.

Moreover, the wedding season in India has begun and the demand for gold is expected to be driven further, with a potential increase in prices. The wedding industry in India, expected to add ₹5.9 trillion to the country’s economy this year as per the Confederation of All India Traders (CAIT), usually aids the bullish momentum of gold prices.