Gold prices extend decline: What’s weighing on bullion

Gold prices extended their decline in global markets on Friday, August 14, as investors continued to book profits after the precious metal’s recent rally.

COMEX gold was trading at $4,374.30 per ounce, down $46.10, or 1.04%, from the previous close of $4,408.20 anounce. The contract touched an intraday high of $4,419.40 an ounce and a low of $4,368.60 an ounce.

The decline follows a sharp correction in India on Thursday (August 13).

Gold prices in New Delhi fell ₹2,800 to ₹1.57 lakh per 10 grams, according to the All India Sarafa Association, after rising for seven consecutive sessions.

The pullback came after the recent rally pushed gold prices to elevated levels, prompting investors to book profits.

Analysts had noted that expectations around softer US inflation had already been reflected in bullion prices following the release of July’s Consumer Price Index data.

Jateen Trivedi, VP Research Analyst - Commodity and Currency at LKP Securities, said the in-line US CPI reading had been largely priced into bullion during the recent rally. He said the market would now look for fresh triggers from the US dollar, crude oil prices and Federal Reserve rate expectations.

Gold has gained around 10-11% in dollar terms over the past month, supported by expectations of lower yields, weaker US employment data, continued Chinese gold purchases and a softer US dollar, according to Anand K Rathi, Co-Founder of MIRA Money.

Gold generally benefits from lower yields and a weaker dollar as these factors reduce the opportunity cost of holding the non-yielding asset and can support demand.

Attention now remains on US economic data and the Federal Reserve’s policy outlook. Markets are assessing whether inflation trends could allow the US central bank to adopt a more accommodative stance, which could influence demand for gold.

The broader market backdrop also remains important.

Oil prices edged higher on Friday (August 14) after the US threatened to maintain a naval blockade of Iran indefinitely, reviving concerns over global crude supply. However, weaker global demand expectations have kept the outlook for commodities mixed.

For Indian investors, global gold prices, the rupee-dollar exchange rate and domestic demand also influence local bullion prices. As a result, a fall in international gold prices may not always translate into an equivalent decline in domestic gold rates.

In India, gold imports rose 4.77% year-on-year to $4.16 billion in July, while cumulative imports during April-July increased 32.41% to $15.17 billion. The government raised the import duty on precious metals from 6% to 15% with effect from May 13.

For gold, the near-term focus is likely to remain on US inflation and interest-rate expectations, movements in the dollar and Treasury yields, along with profit-taking after the recent rally.

-With Reuters inputs

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This article is for informational purposes only and should not be construed as investment advice. Readers should consult certified experts before making any investment decisions.