Gold prices drop below 1.43 lakh on MCX before Diwali

Gold prices dropped sharply on Friday as the rate on the Multi Commodity Exchange fell below the 1.43 lakh rupees per 10 grams mark ahead of Diwali celebrations next week. MCX gold futures with a December 2026 expiry traded down 0.99 percent at 1,41,181 rupees per 10 grams. This drop follows a record high for the precious metal in January of this year. Global spot gold fell one percent to 3,980.40 dollars per ounce, hitting its lowest level since July 17 and heading toward its second consecutive monthly decline. Silver also faced heavy selling pressure due to concerns over industrial demand. Gaurav Garg, Head Research Lemonn, noted that gold slipped under the key 4,000 dollar level because stronger US inflation data and expectations of a December Federal Reserve rate hike reduced the appeal of non-yielding assets. Giovanni Staunovo, a UBS analyst, pointed out that strong US GDP data and higher oil prices are pushing the Fed toward further interest rate hikes, though he suggested gold could rise to 5,000 dollars or higher next year if the Fed cuts rates and inflation eases. Meanwhile, Amit Goel, Chief Global Strategist at PACE 360, stated that the price correction provides a good long-term investment opportunity with potential for higher returns over time.

Context

Precious metal prices often react strongly to US economic reports because global gold and silver trades are priced in US dollars and influenced by American interest rates. When US inflation and growth figures run higher than expected, central banks typically keep borrowing costs elevated, which makes non-yielding assets like gold less attractive to investors compared to interest-bearing options.