What’s driving the fall in gold prices after record highs

Gold prices have declined sharply after touching all-time high levels earlier this month, as investors book profits amid easing geopolitical tensions, stronger dollar trends, and moderating post-festive demand.

Spot gold, which hit an all-time high of $4,381.21 per ounce, has dropped over 6% to just below $4,100, marking its largest intraday fall since 2013. In India, prices slipped from ₹1.32 lakh to around ₹1.21 lakh per 10 grams, reflecting global cues and seasonal adjustments.

Profit booking and seasonal moderation

Analysts attribute the recent fall primarily to profit booking after a steep rally. With the festive season demand tapering off and investors reassessing risk positions, gold’s safe-haven appeal has temporarily weakened.

“Prices continue to drop as investors take profits and global cues become uncertain,” said Aksha Kamboj, Vice President of the India Bullion & Jewellers Association (IBJA). “Demand has stabilised after the festive season, and a stronger US dollar has reduced safe-haven buying.”

She added that while short-term buying may slow, long-term investors continue to see value in gold, especially ahead of the wedding season.

Technical reversal signals

Market analysts also point to a technical correction after an extended rally. Tejas Shigrekhar, Chief Technical Research Analyst at Angel One, noted that gold had reached “historically overbought levels,” triggering a reversal in momentum.

“Gold has declined nearly 8% from its peak, showing signs of a trend reversal,” he said, adding that traders are now increasing exposure to put options, anticipating continued weakness as seasonal demand softens.

Stronger US dollar weighs on bullion

The strengthening of the US dollar index has been another major drag on gold. A stronger dollar makes gold more expensive for investors using other currencies, leading to reduced demand.

Historically, the dollar and gold move inversely, as higher dollar values lower the appeal of non-yielding assets like bullion.

Easing geopolitical concerns and trade optimism

Gold’s safe-haven demand has also been tempered by improving geopolitical and trade sentiment. Reports of progress toward a US–India trade agreement and potential dialogue between the US and China have encouraged investors to shift back to risk assets.

“Gold prices are set to break their nine-week winning streak as investors book profits amid optimism over trade talks and a stronger dollar,” said Darshan Desai, CEO of Aspect Bullion & Refinery.

What could influence prices next

Market participants are now watching upcoming US inflation data closely. A softer-than-expected consumer price index (CPI) print could revive expectations of rate cuts, lending fresh support to gold. Conversely, if inflation remains sticky and the dollar continues to strengthen, the correction may deepen.

After an extraordinary rally, gold appears to be taking a breather. Whether this pause turns into a prolonged correction or a temporary consolidation will depend on macroeconomic signals in the weeks ahead.