Why Are Gold Prices Falling? Market Experts Explain the Key Reasons Behind the Decline

Gold prices have been witnessing a steady decline after reaching record highs in September. Rising US inflation, expectations of an interest rate hike and a stronger dollar are putting pressure on the precious metal in international and Indian markets.

Gold prices, which had been rising consistently over the past few months, have recently taken a downward turn. The decline in international markets has also started affecting gold prices in India. With the global price of gold falling below $4,000 per ounce, investors and jewellery buyers are closely watching market developments.

Gold Prices Drop After Reaching Record Highs

According to data from the India Bullion and Jewellers Association (IBJA), the price of 24-carat gold stood at Rs. 1,54,280 per 10 grams on August 31. It climbed further to Rs. 1,55,801 on September 3, marking a new record high.

However, gold prices began declining gradually after reaching this peak.

On October 11, the price of 10 grams of gold stood at Rs. 1,51,480. It fell to Rs. 1,44,506 on November 5 and dropped further to Rs. 1,42,420 on November 10. By the evening of November 11, the price had declined to Rs. 1,40,603.

This represents a decrease of Rs. 15,198 compared with the record level recorded in early September.

Gold Prices in Chennai Also Witness a Decline

The downward trend has also been reflected in the Indian retail market.

In Chennai, on November 12, 24-carat gold was priced at approximately Rs. 1,39,800 per 10 grams, while 22-carat gold was quoted at Rs. 1,28,150.

Meanwhile, gold futures in the Indian market were trading at around Rs. 1,39,000 per 10 grams.

In international trading, gold prices declined by as much as 1.4 per cent on November 12, falling to $3,931.54 per ounce.

US Inflation Raises Interest Rate Concerns

Market experts identify rising US inflation and expectations of a possible interest rate hike as major reasons behind the recent fall in gold prices.

US consumer price inflation for October increased by 0.4 per cent, exceeding market expectations of 0.3 per cent.

The higher-than-expected inflation figure has strengthened expectations that the US Federal Reserve could increase interest rates by 0.25 percentage points in December.

Higher interest rates generally make interest-bearing investments more attractive compared with gold, which does not generate regular interest income. As a result, demand for gold may weaken when investors expect borrowing costs and returns on interest-bearing assets to rise.

Stronger US Dollar Adds Pressure on Gold

The US dollar is another important factor influencing international gold prices.

When the dollar strengthens, gold becomes more expensive for buyers using o other currencies. This can reduce international demand and put additional pressure on prices.

According to market experts, growing expectations of a US interest rate increase have played a significant role in the recent decline.

What Could Happen to Gold Prices Next?

Market analysts believe gold prices could remain under pressure in the short term. The direction of US inflation, the Federal Reserve`s December interest rate decision and movements in the dollar will be important factors.

If the Federal Reserve raises interest rates, gold prices could face further downward pressure. However, a reduction in rate hike expectations or an increase in global economic and geopolitical tensions could support a recovery in gold prices.

For now, investors and jewellery buyers will be watching these developments closely as the gold market responds to changing global economic conditions.