Gold Prices Dip Amid Easing Geopolitical Tensions and Delayed Rate Cuts

Gold experienced its first weekly price decline in six weeks as anticipation of interest rate cuts by the Federal Reserve wanes and geopolitical tensions in West Asia diminish. Investors have retreated from the metal, leading to a price drop of over 2% last week.

Ajay Kedia, market expert and head of Kedia Advisory, commented, “Peace negotiations between Israel and Hamas in Cairo have raised hopes for a de-escalation in the Middle East, boosting investor interest in riskier assets and reducing the appeal of gold as a safe haven.”

Kedia also noted, “Based on fundamental analysis, we expect gold prices to potentially fall to $2,290, with the MCX possibly reaching the 70,500 level.”

Market analysts have pointed out that despite recent significant gains, a correction in gold prices was necessary. Delays in Federal Reserve rate cuts have bolstered the dollar index and U.S. Treasury yields, applying downward pressure on gold prices.

According to a report by Motilal Oswal Financial Services, the advance U.S. GDP data indicated a significant slowdown to a 1.6% annual rate in the last quarter amid high interest rates. The U.S. personal consumption expenditures (PCE) price index remained stable, suggesting the Federal Reserve may postpone rate cuts until September.

In the first quarter, China’s gold consumption increased by nearly 6% year-over-year. In India, physical gold dealers charged premiums for the first time in nearly two months last week, as a dip in domestic prices attracted buyers, though premiums in China, a major consumer, decreased.

The report also noted that domestic gold prices in India are expected to fluctuate between Rs. 71,000 and Rs. 71,800, as market sentiments remain cautious amid evolving economic indicators.

Traditionally, gold is viewed as a reliable asset, often maintaining or increasing its value during turbulent times.

At the time of this report, gold is trading at $2,346 per ounce, having risen approximately 7% in April.