Gold Prices Decline By Up To Rs 900 On MCX In Single Session - Here's Why

Gold prices fell on May 26, tracking weakness in Comex Gold. In domestic markets, MCX Gold June Futures fell as much as Rs 914 per 10 grams to hit an intraday low of Rs 95,507. As of 5:15 PM, it traded at Rs 95,680 per 10 grams, down by Rs 741 or 0.77 per cent.

In the international markets, Comex Gold June Futures fell by as much as $42.9 an ounce or 1.27 per cent to touch an intraday low of $3,322.9 an ounce. Around the same time, it traded at $3,329.9 per ounce, down by $35.9 or 1.07 per cent.

Why Gold Prices fell Today

Prathamesh Mallya, DVP- Research, Non-Agri Commodities and Currencies, Angel One, told Outlook Money: “Gold prices are falling today on account of probable signs that US President Donald Trump might ease his aggressive stance on trade with the European Union (EU) along with ease in US-China tariff tensions.”

According to Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities, the shine in yellow metal was also dulled because of weaker rupee. "The domestic market faced headwinds as USD-INR volatility added resistance, limiting gold’s upside despite global uncertainties," he said.

However, Kaynat Chainwala, AVP- Commodity Research, Kotak Securities, told Outlook Money: "Safe-haven bids may face further pressure as Trump cited "real progress" in nuclear talks with Iran and indicated that an announcement regarding the deal could be made within two days."

"Although tensions surrounding the US-EU trade dispute have temporarily eased, broader risk appetite may remain constrained due to ongoing trade, geopolitical, and fiscal uncertainties. As a result, while gold may face some downside, these lingering concerns could help limit further declines in the yellow metal," Chainwala added.

The Gold Rush

Prior to this decline in prices, the yellow metal has shown heavy demand across the world, driven by a slew of factors.

According to a Morgan Stanley report dated May 23, gold demand in the first quarter of 2023 was the highest since 2016, driven mainly by investment, particularly through gold exchange traded funds (ETFs). This surge in demand more than made up for weaker jewellery sales and slower buying from central banks, the brokerage firm said.

“After four years of outflows, gold ETFs have added 227 tonnes of gold this year, reaching levels not seen since Q1 FY22. This trend continued into early April, following the US 'Liberation Day'. The buying was fuelled by rising uncertainty, with North America and Asia leading the way in inflows as investors shifted away from other asset classes. In fact, April saw record high ETF inflows from Asia, mainly driven by China. In North America, while ETF inflows slowed compared to February and March, it was still the second strongest April on record. Meanwhile, Europe experienced modest outflows, as a strong stock market recovery made gold less attractive to investors,” said the report.

Should Investors Buy Now Or Wait For More Correction

Mallya of Angel One advised, “Investors should wait for a meaningful correction towards Rs 90,000 per 10 grams mark for buying and accumulation.”

Trivedi of LKP Securities said, “Gold is expected to remain volatile with a trading range between Rs 94,500 and Rs 96,750." He added, currency movements and global trade developments will be closely monitored for further cues.