Gold prices have decreased in India as the festive season approaches, providing potential buyers with an opportunity to purchase the yellow metal at more favourable rates. As of Wednesday, October 21, MCX Gold was trading at Rs 1,45,898 per 10 grams, reflecting a drop of 0.42% around 11.30 am. Concurrently, MCX Silver was also experiencing a decline, priced at Rs 2,09,028 per kg, down by 1.16%. This recent downturn in gold prices comes amid rising crude oil costs, which have raised inflation concerns, while investors await the upcoming policy meeting of the US Federal Reserve for insights into future interest rate movements.

Factors Influencing Gold Price Decline

The decline in gold prices marks the fourth consecutive session of falling values, primarily attributed to increasing oil prices that have intensified inflation worries. Crude oil prices have risen due to concerns regarding supply disruptions in the Middle East, particularly threats to shipping routes in the Red Sea and oil infrastructure in Saudi Arabia. Such increases in oil prices can lead to higher inflation, complicating the outlook for interest rates. Investors are closely monitoring the next policy decision from the US Federal Reserve, as shifts in interest rate expectations can significantly impact gold prices.

Despite the recent price drop, experts caution that gold prices may continue to face downward pressure in the near term. Ponmudi R, the CEO of Enrich Money, noted that MCX Gold opened lower at approximately Rs 1,46,300 and is currently testing a support zone between Rs 1,45,300 and Rs 1,46,000. He indicated that immediate resistance is found in the Rs 1,48,000-1,48,600 range, where Rs 1,48,000, previously a support level, has now turned into resistance following a failed recovery earlier in the week. The next resistance zone is identified as Rs 1,50,000-1,50,700.

Ponmudi also highlighted the importance of technical indicators, noting that the Relative Strength Index (RSI) is near 40, suggesting a potential for further weakness. The widening negative histogram of the MACD indicator indicates increasing downward momentum. These indicators suggest that unless gold prices recover above immediate resistance levels, they may remain under pressure.

Future Price Predictions and Buying Strategy

The possibility of further declines in gold prices cannot be dismissed, especially if crude oil prices remain high and inflation concerns persist. The upcoming Federal Reserve meeting is anticipated to influence the trajectory of gold prices. Aamir Makda, a Commodity and Currency Analyst at Choice Broking, stated that gold had resumed trading flat at Rs 1,46,328, but may remain in a negative trend for the next session. He reiterated that higher crude oil prices are exacerbating inflation concerns, and investors are looking for guidance from the Federal Reserve’s policy meeting next week.

Makda pointed out that gold has found support around its 200-day Exponential Moving Average (DEMA) at Rs 1,45,861. He identified the resistance range as Rs 1,47,415-1,47,900. A breakout below the support level could accelerate the downward momentum in gold prices, suggesting that traders should consider a sell-on-rise strategy. A sustained fall below the support level could further pressure gold prices; however, if prices manage to hold above this level and recover, the decline might lose momentum.

For consumers planning to purchase jewellery for Dhanteras, Diwali, or weddings, the recent price drop may present a buying opportunity. However, it is essential to note that a temporary decline does not guarantee that gold has reached its lowest point. Ponmudi advises buyers to closely monitor the Rs 1,45,300-1,46,000 support zone. If prices fall below this range, the next support area is between Rs 1,43,000 and Rs 1,43,700. Conversely, a recovery above Rs 1,48,000-1,48,600 would indicate renewed buying interest.

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