Gold prices in India dropped sharply on Friday, plummeting by Rs 839 to Rs 95,073 per 10 grams in futures trade, as the US dollar strengthened and traders anticipated a potential de-escalation of the US-China trade war. In the face of weak global cues, gold futures slipped by USD 40.26 to USD 3,308.34 per ounce in New York, indicating that the precious metal was facing pressure due to the strengthening US dollar and the hopes of a potential thaw in tensions between the two superpowers. Analysts attribute the fall in gold prices to the weak global cues, particularly the strengthening US dollar, which has been a major driver of gold prices for years. The US dollar’s rise has made gold less appealing to investors, as it is seen as a safe-haven asset.

“Gold prices are under pressure as the US dollar strengthens on hopes of progress in US-China trade talks,” said Abans Financial Services’ Chief Executive Officer Chintan Mehta. “With the strengthening US dollar, investors are looking to hedge against volatility and geopolitical instability, which is leading to a decrease in gold demand,” Mehta added.

One of the key factors contributing to the decline in gold prices is China’s consideration of exempting some US imports from its steep 125 per cent tariffs. This development has eased safe-haven demand for gold, as investors anticipate a potential thaw in tensions between the two countries. If this trend persists, gold prices may remain under pressure in the near term, as investors become more confident in the potential for a resolution to the trade war. The easing of safe-haven demand for gold can have a ripple effect on the overall market, leading to a decrease in gold prices.

Geopolitical Uncertainty

Increased Volatility

Safe-haven Demand

Economic Uncertainty

On the geopolitical front, escalating tensions between India and Pakistan have created a volatile environment, where investors are looking to hedge against volatility and geopolitical instability. The situation is further complicated by the potential for a major conflict between the two countries, which could have significant economic implications. Analysts also point to the upcoming IMF meeting this weekend, where any indications of further policy easing or extended global uncertainty could enhance gold’s appeal and reinforce safe-haven demand.

According to HDFC Securities’ Senior Analyst of Commodities Saumil Gandhi, traders are looking forward to US macroeconomic data, including the Michigan Consumer Sentiment Index and 1-year inflation expectations to be released later in the day. The data release will gauge the strength of the economy and potential future monetary policy decisions by the US Federal Reserve. Additionally, trade-related comments may have an impact on the overall market direction.

1. US Macro Economic Data
2. Trade-related Comments
3. US Federal Reserve Monetary Policy Decisions

In the spot markets, gold prices dropped by Rs 655 to Rs 95,631 per 10 grams (99.9 purity) and the standard gold (99.5 purity) declined by Rs 652 to Rs 95,248 per 10 grams. Key Takeaways
• Gold prices have retreated due to the strengthening US dollar and the hopes of a potential de-escalation of the US-China trade war. • The weakening of safe-haven demand for gold due to the easing of tensions between the US and China has contributed to the decline in gold prices. • The upcoming IMF meeting and US macroeconomic data will have an impact on the overall market direction. • Geopolitical uncertainty and increased volatility have created a challenging environment for investors.