Gold Rate in India: Will the prices fall below ₹1 Lakh this year?

Synopsis: Gold’s recent rally, driven by rupee weakness, global uncertainty, and festive demand, has cooled amid profit-taking and easing geopolitical fears. Will the precious metal fall back to Rs. 1,00,000 levels or will the rally continue? 

Gold prices have been on a rollercoaster ride lately, swinging between record highs and sharp corrections driven by global tension, rupee weakness, and expectations of the U.S. Federal Reserve rate cuts, gold prices have now seen a pause, prompting the big question, Are Gold Prices Headed Back Toward Rs. 1,00,000?

On Monday, October 27, MCX Gold December futures slipped 0.78% to Rs. 1,22,490 per 10 grams at 9:32 am, while MCX Silver December contracts declined 1.07% to Rs. 1,45,898 per kg. According to data from the Indian Bullion Association (IBA), 24-carat gold was priced at Rs. 1,22,590 per 10 grams and 22-carat gold at Rs. 1,12,374 per 10 grams at 9:40 am. 

What Caused The Recent Surge In Gold Prices?

The recent rally in gold prices can be attributed to a combination of global uncertainty, currency weakness, and strong seasonal demand in India. The Indian rupee’s depreciation against the U.S. dollar has played a key role, as India imports nearly 86% of its gold requirements. A weaker rupee raises import costs, which gets reflected in domestic prices. With the festive season underway and Dhanteras and Diwali buying at its peak, this currency impact has intensified the rally.

Adding to the bullish momentum, geopolitical tensions and economic instability across the world have pushed investors towards safe-haven assets like gold. Ongoing conflicts such as the Russia-Ukraine war, political turbulence in the Middle East, and uncertainty over U.S. fiscal policy have heightened demand for bullion. Furthermore, expectations of U.S. Federal Reserve rate cuts and a softer dollar have encouraged speculative and institutional buying globally.

Central banks, including the Reserve Bank of India, have also been significant contributors to gold’s upward trajectory by steadily adding to their reserves to diversify holdings. This institutional demand, coupled with robust retail purchases driven by cultural and festive sentiment, has kept domestic gold prices elevated despite the high base.

What Could Trigger A Fall In Gold Prices?

After recording its biggest weekly gain in five years, gold prices recently witnessed a sharp correction alongside silver, which plunged over 5% in a single session. This drop followed heavy profit-booking after the strong rally earlier this year. Market sentiment turned cautious amid signs of easing geopolitical risks and hopes of a potential cease-fire between Russia–Ukraine and Israel–Hamas.

Statements from U.S. President Trump urging Ukraine to consider a peace deal and signalling optimism toward meeting Chinese President Xi Jinping have further supported the view of improving global risk appetite. As COMEX gold touched near $4,400 and silver surged over 85% year-to-date, traders began offloading positions, triggering margin calls and panic selling as the dollar index strengthened.

Looking ahead, three key factors could pressure gold prices. First, continued profit-booking by traders may lead to temporary pullbacks, especially as investors lock in gains ahead of major global events. Second, a stronger rupee could limit domestic upside since gold is dollar-priced internationally. Any rebound in India’s currency would make gold relatively costlier, dampening demand. Third, if the Federal Reserve delays or scales back its rate-cut cycle, the higher opportunity cost of holding non-yielding assets could further cap the upside.

Moreover, an improvement in global risk sentiment, driven by progress in the U.S.-China trade talks or stabilization in inflation, may shift investor preference toward equities or other higher yielding instruments. Any policy tightening by key consuming nations or hikes in import duties could also cool buying momentum, potentially pushing prices closer to the Rs. 1,00,000 mark.

Still, persistent geopolitical tensions, U.S. political uncertainty, and delayed economic data releases due to the government shutdown continue to lend fundamental support to gold. Softer-than-expected U.S. inflation data last week also provided immediate backing to bullion prices.

Market Outlook

“Comex gold snapped its nine-week winning streak last week, falling over 3% amid profit-taking ahead of the highly anticipated meeting between President Trump and Xi Jinping later this week,” said Deveya Gaglani, Senior Research Analyst – Commodities, Axis Securities.

He added that progress in U.S.-China trade negotiations has reduced safe-haven buying, as top negotiators reached a preliminary understanding after talks in Malaysia. Global focus now shifts to central bank policy updates, with the U.S. Federal Reserve, European Central Bank, and Bank of Japan all set to announce key decisions.

“The Fed is widely anticipated to cut interest rates by 25 basis points after softer-than-expected CPI data last week, while both the ECB and BOJ are likely to maintain their policy stance,” Gaglani said.

In the domestic market, he noted, physical demand has weakened at record-high levels. “Strong support is placed near Rs. 1,17,000, while resistance is seen around Rs. 1,24,000.”

In simpler terms, gold prices are expected to stay within a limited range for now, they are unlikely to see a steep decline but may also struggle to move much higher unless fresh global uncertainties arise. For Indian investors, this could be a time to stay cautious and avoid making aggressive new entries.

Conclusion

Overall, the recent fall shows that gold’s strong rally is slowing down for now. In the coming weeks, prices will mainly depend on how the rupee moves, what central banks decide, and whether global tensions rise again. For now, investors may be better off waiting and watching instead of buying at higher levels.

-Manan Gangwar 

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