Gold prices dip — but is this correction or a shift in the safe-haven narrative?

Gold prices extended their decline on Monday (October 27), as a firmer US dollar and signs of easing geopolitical and trade tensions prompted investors to reassess their appetite for safe-haven assets. After a powerful two-month rally that saw bullion touch record highs, the latest pullback is raising questions about whether gold is merely consolidating — or entering a new phase.

Spot gold was down 0.7% at $4,082.77 per ounce, while US futures fell 1% to $4,095.80. In India, 24-karat gold traded at ₹12,448 per gram, with 22-karat and 18-karat prices at ₹11,410 and ₹9,336 respectively.

The US dollar strengthened to a two-week high against the yen, reducing gold’s appeal for holders of other currencies. At the same time, optimism over renewed US–China trade progress added to risk-on sentiment, diverting flows into equities and away from bullion.

“This potential trade deal between the US and China came as a positive surprise for markets,” said Kyle Rodda, analyst at Capital.com. “While that’s dampened gold’s appeal for now, expectations of continued loose fiscal and monetary policies should keep its broader uptrend intact.”

The retreat follows a period of intense buying driven by safe-haven demand amid global uncertainty.

With inflation showing signs of easing and risk sentiment improving, some analysts view the current decline as a natural correction after overextended gains — not necessarily a structural shift.

However, much depends on the Federal Reserve’s policy tone at its meeting on Wednesday (October 29).

A widely expected 25-basis-point rate cut is already priced in, but investors are watching Fed Chair Jerome Powell’s commentary for clues on future easing. Any hint of a pause could weigh further on bullion, while dovish guidance may revive momentum.

Adding to the mixed picture, holdings in the SPDR Gold Trust — the world’s largest gold-backed ETF — fell 0.52% to 1,046.93 metric tons on Friday, signaling reduced institutional interest.

Darshan Desai, CEO, Aspect Bullion & Refinery, noted that gold’s short-term trajectory hinges on macro headlines.

“Safe-haven demand has weakened amid optimism over a potential trade deal and a stronger U.S. dollar. This week is crucial — from central bank meetings to global earnings, any positive surprise could trigger more profit-taking," Desai said.

Rahul Kalantri, VP–Commodities, Mehta Equities, agreed that technical levels are being tested.

“After an exceptional rally, gold faced strong selling pressure as the dollar firmed and trade headlines turned positive. Support for gold is seen at $4,050–$4,005 an ounce, with resistance at $4,145–$4,165 an ounce. In India, prices may find support near ₹1.22 lakh–₹1.21 lakh per 10 grams," Kalantri said.

Is this just a pause?

Analysts remain divided. Some see this phase as a healthy consolidation before the next leg up, citing expectations of continued policy easing and lingering global risks.

Others believe the market could stay range-bound if the Fed signals confidence in economic recovery and the dollar extends its rally.

For now, gold’s safe-haven narrative appears intact — but under scrutiny. The coming days may reveal whether this pullback is just a breather or an early sign of sentiment shifting away from the metal that defined much of 2025’s market caution.

-With Reuters inputs