Gold Prices Crash Sharply from Rs 91,400; Will Gold Fall 40 Per Cent Over the Next Few Years - Know Reasons Here!
Indian markets mirrored the trend, with 24-carat gold falling to Rs 88,193 per 10 grams.
Gold prices experienced a significant decline on Friday following the revelation that precious metals were excluded from President Trump's "reciprocal" tariff plans. Given that the markets had already accounted for the impact of these trade measures over the past few months, it was not surprising that investors chose to realise their profits at this point.
On Monday (April 7), spot gold dipped another 0.3 per cent to USD 3,027.90 an ounce, hitting its lowest level since March 13. Indian markets mirrored the trend, with 24-carat gold falling to Rs 88,193 per 10 grams.
The value of gold has recently fallen from its record highs as a wave of profit booking has somewhat dimmed the lustre of this precious metal. After peaking at around Rs 91,400 per 10 gm on futures, prices underwent a brief sell-off, a common event when a commodity trades near all-time highs. Investors began to feel that the risk/reward ratio was unfavourable on the upside, leading many to book profits. In addition to taking profits, investors also sold off their gold holdings to offset losses in other trades, as the global downturn erased trillions of dollars from investors' portfolios.
The previous surge in gold prices was propelled by substantial central bank purchases, escalating geopolitical tensions, and fears of a full-scale trade war. With the announcement of tariffs by U.S. President Donald Trump, gold prices began to rise. Concerns about potential disruptions in shipments due to tariffs led investors to choose physical gold deliveries over cash settlements, further driving up demand for the yellow metal.
Looking forward, it is anticipated that while there may be short-term consolidation, the long-term outlook for gold remains positive. Despite the recent pullback, fundamental factors such as trade war anxieties, ongoing geopolitical conflicts, strong central bank buying, and the acceleration of de-dollarisation, are expected to provide solid support for gold prices.
In the short term, however, the trend might lean slightly negative as prices consolidate at current levels. While there are limited immediate triggers for gold to reach new highs, the underlying tailwinds ensure that any potential downside will likely be cushioned.
On the other hand, a more pessimistic view emerges from a report predicting that gold could lose up to 40 per cent of its value over the next few years from its current price.
Why might gold decline?
Increasing Gold Supply: A rise in mining activities and higher profits have increased the global supply of gold. Furthermore, a surge in recycled gold entering the market has expanded availability, which could put downward pressure on gold prices.
Diminishing Demand: After collectively purchasing over 1,000 tonnes of gold last year, central banks' appetite now seems to be waning. A recent survey by the World Gold Council reveals that 71 per cent of central banks plan to either maintain or reduce their gold reserves, suggesting a potential slowdown in institutional demand.
Concerns of Market Saturation: The gold industry has seen a 32% increase in mergers and acquisitions in 2024, indicating growing market consolidation. Simultaneously, the proliferation of gold-backed ETFs is beginning to mirror trends observed before previous price downturns, raising concerns about potential corrections.
Disclaimer: The article is for informational purposes only and not investment advice