Gold prices experienced a significant drop of over 2 per cent during a volatile session on Monday, as investors sold off positions alongside a broader decline in equities. By 1139 GMT, spot gold had fallen to $2,393.66 per ounce, while U.S. gold futures decreased to $2,434.10. This sudden plunge in gold prices has left many investors wondering about the factors behind this decline and what it means for the future of the precious metal market.
Last week, both gold and silver prices saw significant price volatility, with gains in the international markets. Gold prices reached a lifetime high amid hopes for Federal Reserve rate cuts and disappointing U.S. job data. Silver also followed suit, surpassing $28.50 per troy ounce. However, both precious metals were unable to sustain these highs, declining after weaker-than-expected U.S. job reports and factory orders data, which heightened recession fears. Additionally, the Japanese Yen made a strong comeback against the U.S. dollar, increasing volatility in global financial markets. Despite this, gold and silver prices dipped from their peaks but found support due to dollar weakness and escalating tensions in the Middle East.
Rahul Kalantri, VP Commodities at Mehta Equities Ltd., stated, „Gold has support at $2418-2398 and resistance at $2454-2474. Silver has support at $28.10-27.88 and resistance at $28.64-28.85.“ This analysis provides insight into the potential price movements for gold and silver in the near future, based on current market conditions and external factors.
The plunge in gold prices can be attributed to the broader decline in stock markets, with Japanese shares surpassing their 1987 Black Monday losses at one point. Concerns about a potential U.S. recession have driven investors to sell off riskier assets, leading to a decline in gold prices. Data released on Friday revealed that the U.S. unemployment rate rose to 4.3 per cent in July, increasing the chances of an interest rate cut by the Federal Reserve in September. Markets are now anticipating a potential reduction of up to 50 basis points by the central bank.
Bullion, often used as a safeguard against geopolitical and economic uncertainties, tends to perform well when interest rates are low. However, concerns about a potential recession have led to a decline in prices for other precious metals. Jateen Trivedi, VP Research Analyst at LKP Securities, stated, „A potential preemptive U.S. interest rate cut could increase buying pressure in gold, especially since recent economic data from the U.S. has not been supportive.“ This analysis suggests that gold prices may see increased volatility in the sessions ahead, with a price range expected to be between ₹69,000 and ₹71,000.
In addition to gold, other precious metals also experienced a decline in prices. Spot silver fell by 5.7 per cent to $26.92, platinum dropped 4.1 per cent to $918.35, and palladium decreased by 4.5 per cent to $849.05, reaching its lowest point since August 2018. Platinum and palladium, which are used in engine exhaust systems to lower emissions, are facing pressure due to the long-term risks associated with the shift towards net-zero emissions.
Overall, the recent plunge in gold prices can be attributed to a combination of factors, including concerns about a potential U.S. recession, interest rate cuts by the Federal Reserve, and broader market volatility. Investors will need to closely monitor these developments to make informed decisions about their gold investments in the coming days and weeks.