Why Are Gold Prices Falling After A Nine-Week Rally? Experts Decode

After nine successive weeks of gains, gold prices are witnessing their first weekly decline, and it’s the sharpest since May. The precious metal, which had surged to historic highs earlier this month, is finally taking a breather as global risk sentiment improves and investors book profits.

On October 27, 2024, gold prices slipped further in early trade. According to the data, the price of 24-carat gold fell by ₹10 to ₹1,25,610 per 10 grams, while 22-carat gold also dropped ₹10 to ₹1,15,140 per 10 grams. The price of silver too declined ₹100 to ₹1,54,900 per kilogram.

In key cities such as Mumbai, Kolkata, and Chennai, 24-carat gold was priced at ₹1,25,610 per 10 grams, while Delhi recorded a slightly higher price of ₹1,25,760 per 10 grams. The uniform pricing pattern across major metros indicates a broad-based correction in domestic bullion markets.

The Rise Before the Fall
Gold’s stellar rally began in August, fueled by safe-haven demand amid escalating geopolitical tensions and fears of a prolonged US-China trade war. At one point, global prices reached an all-time high of $4,381.52 per ounce, before a sharp decline on October 21 triggered by heavy outflows from gold-backed exchange-traded funds (ETFs).

Sugandha Sachdeva, Founder of SS WealthStreet, explained the recent price action:
“Gold has finally taken a breather after an extraordinary run, ending its nine-week winning streak with a sharp weekly decline of 3.19%. In the domestic market, prices have corrected by nearly 6.8% from their recent highs of ₹1,32,294 per 10 grams, stabilizing near a key support zone around ₹1,21,000 per 10 grams,” she said.

She added that gold faced strong resistance at $4,380 per ounce, which led to profit-taking after a “year of relentless upside and repeated record highs.”

Why Are Gold Prices Falling Now?
The recent fall in gold prices can be attributed to a confluence of global and domestic factors, the biggest being the easing of trade tensions between the United States and China.
According to Sachdeva, “A key trigger was the easing of US-China trade tensions, as President Trump’s recent comments suggested that the proposed 100% tariffs may not be sustainable, reducing one of the key geopolitical risk premiums that had been supporting prices.”

The US President is expected to meet Chinese President Xi Jinping in South Korea next week, a development that has injected optimism into global markets, reducing the appeal of gold as a safe-haven asset.

Additionally, hopes of resolving the ongoing US government shutdown and a rebound in the US dollar index have further weighed on gold’s short-term momentum. A stronger dollar typically makes gold more expensive for non-US buyers, dampening global demand.

On the domestic front, a seasonal dip in physical demand following the festive buying spree has also contributed to the pullback.

Profit-Booking and ETF Outflows Add Pressure
The correction in gold prices also coincides with significant profit-booking by investors and outflows from gold ETFs, which had witnessed massive inflows during the August–October rally.

Data shows that gold prices had surged nearly 72% at their recent peak, marking an almost parabolic rise. This, experts say, made the metal “deeply overbought,” and a correction was inevitable.

“This correction appears to be a healthy reset of market excesses,” Sachdeva noted. “Prices had entered deeply overbought territory after an almost parabolic rise, surging around 72% at its recent peak and rising nearly 33% since August alone.”

What Lies Ahead for Gold?
Despite the short-term weakness, analysts believe the long-term outlook for gold remains positive. A combination of geopolitical uncertainty, central bank buying, and expectations of monetary easing continues to underpin its strategic appeal.

US inflation data released recently, with September CPI at 3% year-on-year and core inflation easing, has strengthened the case for another 25-basis-point rate cut by the US Federal Reserve, a move that could lend near-term support to gold prices.

Technically, key levels to watch are ₹1,21,000 per 10 grams and $4,000 per ounce. If these support levels hold, gold may rebound toward ₹1,28,000. However, a decisive break below ₹1,21,000 could open the door for further downside, Sachdeva warn.

The Bigger Picture
Even after this correction, gold remains up over 60% year-to-date, driven by safe-haven flows, central bank purchases, and ETF demand. The yellow metal continues to be viewed as a strategic hedge against fiscal fragility, global currency pressures, and a potential shift away from fiat-based liquidity.

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As Sachdeva summed up: “Despite short-term volatility and profit-taking, the medium-to-long term outlook for gold remains bullish. Investors continue to seek refuge in hard assets amid rising fiscal fragility, global currency pressures, and a structural pivot away from fiat liquidity dependence.”

For now, gold’s glitter has dimmed, but experts say this pause might just be the healthy correction the market needed before its next upward leg.