Gold prices remained largely unchanged on Monday after a three-week rise, with the Multi Commodity Exchange (MCX) gold futures contract for February 2025 expiry opening at ₹78,259 per 10 grams. The contract quickly gained momentum, approaching ₹78,400 per 10 grams, just ₹23 shy of Friday’s close of ₹78,423. Meanwhile, in international markets, spot gold hovered around $2,687.56 per ounce, and the COMEX gold price stood at $2,715 per troy ounce.
Market experts attribute the current pressure on gold prices to two key factors: rising US dollar rates and speculation about slower US Federal Reserve rate cuts, following the release of the December 2024 US Fed meeting minutes.
Factors Weighing on Gold Prices
Anuj Gupta, Head of Commodity & Currency at HDFC Securities, explained that gold prices are facing downward pressure due to the strengthening US dollar and the growing expectation that the US Fed will reduce interest rates at a slower pace. Gupta, however, emphasized that the overall outlook for gold remains positive and suggested that any significant decline should be seen as a buying opportunity.
US Fed’s December Minutes and Strong Dollar Impact
Suganda Sachdeva, Founder of SS WealthStreet, pointed to the December 2024 US Fed meeting minutes, which indicated the Fed’s preference for slower rate cuts in 2025, citing persistent inflation and a robust US labor market. This, combined with the US dollar index hitting a high of 109.96, has added pressure on gold prices, as a stronger dollar typically undermines demand for the yellow metal. Additionally, stronger-than-expected job growth in the US, as reflected in the December non-farm payrolls data, further supported the case for a prolonged pause in Fed rate cuts.
Outlook for Gold Prices
Despite the recent dip in prices, Gupta remains optimistic about gold’s long-term prospects, noting two major factors that could support a rebound: the ongoing weakness of the Indian Rupee (INR) against the US dollar and economic uncertainties tied to Donald Trump’s presidential inauguration on January 20, 2025. Gupta encouraged investors to adopt a “buy-on-dips” strategy.
Sachdeva highlighted key price levels for gold, noting that it has established strong support between ₹76,000 and ₹76,500 per 10 grams, with prices trending upward. While she acknowledged the possibility of a short-term correction after a three-week rally, she believes this could present fresh buying opportunities. She identified ₹78,800 per 10 grams as a critical resistance level, with a breakout above this level potentially signaling further upward momentum. However, she cautioned investors to remain vigilant for consolidation or pullbacks, which could provide opportunities to accumulate.
In conclusion, the outlook for gold remains generally positive, but investors should watch key levels and market developments closely.
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