Why do gold prices drop
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Things to Know Be Premium Future told to halt asset sale process. The US Federal Reserve will complete its 2-day policy meet followed by a statement. If the statement suggests a hawkish stance, in terms of hiking interest rates going forward, or a more aggressive stance on reducing its bond buying programme, we could see a sharp fall in gold prices after Sept It's hard to predict, which way the way US Fed would move. But, our own belief is that the US Fed would sound more hawkish, given that economic indicators are good and inflation has been trending higher.
This means that gold prices could be softer in the coming weeks. Gold is a safe haven asset and when economic data is good, investors dump gold for equities.
One this is certain that after Sept 22, there would be sharp movement in gold prices. Spot gold in India has dropped about Rs to Rs in the past 1-week for 22 karats. In Kerala gold rates stands at Rs 43, per 10 grams. It's always hard to predict, which way gold would move from here. But, if you ask us to stick our neck out, we would suggest investors to wait a while as our own belief is that gold prices could fall even lower. We have events like covid now over, there are no risks to the global economy and hence to believe that gold would have a spectacular rally would be far-fetched.
Exchange-traded funds have also cut their holdings significantly this year. Gold traded 1. Bullion futures for December delivery fell 2. Investors will now turn their attention first to the U. The timing of tightening by the U. But when yields dropped deeper into negative territory in the past month, gold prices failed to benefit. Gold is an asset that thrives on momentum, and can be left vulnerable if the price fails to rally for a long time. Further rises in real rates driven by strong economic data could spark more precipitous drops.
Whether rising prices associated with economies reopening will prove transitory or persistent has been a major theme for markets in So far, the market is pricing in transitory inflation, as demonstrated by the falloff in U. The consumer price index due Wednesday will prove the latest gauge for investors, and is expected to be more muted compared to previous months. Strong U. That sets the stage for a stronger greenback, which would hurt gold.