MCX gold futures decline for the fifth straight day, falling below ₹74,000 per 10 gram; here’s why

In a turn of events, precious metals, gold and silver, which remained in the news for the last few weeks for their relentless rally, are now showing signs of correction.

Gold futures near contract with 5 December expiry declined for the fifth straight day on Thursday, November 14, hitting an intraday low of 73,594 per 10 gram in early trade on the Multi Commodity Exchange of India (MCX). This is lower by over ₹6,100, or 7.5%, than the yellow metal’s all-time high of ₹79,775 per 10 gram seen just 15 days back on October 30, 2024.

Silver, too, had hit the ₹1 lakh-per-kg mark on MCX in the last week of October for the first time in history. Three weeks later, its price is trading around 12% lower from those levels at around ₹87,500 per kg.

The domestic gold and silver prices are essentially following the bearish trend in the international yellow metal prices over the past couple of weeks.

On Comex, gold has broken the important support of $2,600 an ounce to fall to $2,567 levels compared with the record high of $2,790.15 seen at October-end. Silver is also down to $30 an ounce from over $32 levels within a span of a couple of weeks.

Key factors behind fall in gold price

Experts believe that precious metal prices are taking a hit due to a stronger dollar and rise in US treasury yields amid slower rate-cut expectations under the administration of US President-elect Donald Trump, who will take office in January 2025.

Besides that, the US inflation is also showing signs of cooling down, which could mean that the US Federal Reserve may not cut interest rates as aggressively as expected.

Data on Wednesday, November 13, showed that the US consumer price index (CPI) in the US rose by 2.6% on an annualised basis in October compared with 2.4% in September. The number was in line with expectations, lowering chances for a December rate cut by the US Fed.

Reacting to the data, the dollar index has strengthened this week. As gold is a dollar-denominated metal, its prices in rupee terms take a hit when the US currency gains against the Indian rupee.

Silver prices, though, have remained relatively steady due to some demand from industrial units. According to a recent report, the global silver market is on pace to record a physical deficit in 2024 for the fourth consecutive year, with the growth of industry demand as the main driver.

Interestingly, a section of markets does not seem to be too worried about a steep correction in prices of precious metals going ahead and believes that the current levels may prove to be good entry points for fresh investments.

Though reduced geopolitical tensions after Trump’s election and a stronger dollar index are hurting gold prices currently, markets believe that a potential 25 bps rate cut from the US Fed in the next policy meeting could prompt fresh buying interest in the yellow metal, thereby setting the tone for fresh rally.