InvestorQ : Why has gold price fallen so sharply in the last week and how do you see gold outlook from here on?
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Why has gold price fallen so sharply in the last week and how do you see gold outlook from here on?

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Niti Shenoi answered.
5 months ago
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Gold prices fell sharply to Rs.48,818 per 10 gram on Friday the 08 January as there were a lot of short position being built up in the futures market. The gold prices normally move inverse to the dollar on the back of easing political risk and a pick-up in equities. In India, the rate of 10 gram of 22-carat gold was Rs.46,186 while 24-carat 10 gram was Rs.50,421.

However, the world’s largest gold ETF, the SPDR Gold Trust saw gold holdings increase by 11.38 tonnes to 1182 tonnes on the bank of heavy gold buying. Back in India, the benchmark index of precious metals, MCX Bulldex, fell 4.88% as it tracks the real-time performance of MCX Gold and MCX Silver futures in a fixed proportion.

Gold prices have come under pressure due to the recovery in the US long-term bond yields. This forced many traders to book profits in gold as risk-on sentiments would mean going long on equities and other productive assets, with gold mostly a safe haven. Also the outcome of the Georgia seats has given more certainty to the next four years in the Senate.

Some of the key factors impacting the value of gold in the coming day will be a smooth handover of the US regime, additional fiscal stimulus, pace of the global economic recovery and the efficacy of the vaccination process. The more this certainty in all these areas, the more equities could rally and the greater will be the pressure on gold.

In the international market, spot gold ranged between $1,820 and $1,900 per troy ounce. Most experts believe that 4% fall in gold in a single day was due to the rise in the dollar index or DXY. With the dollar showing signs of strength, most of the experts in the currency market and the metals market expect that gold could come under further pressure.

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