Gold price crash explained: Why are gold rates falling and when will yellow metal recover?
Experts see near-term volatility and decisions on rate hikes influencing the outlook of gold prices. (AI image) Why are gold prices down? MCX Gold price
Experts see near-term volatility and decisions on rate hikes influencing the outlook of gold prices. (AI image) Why are gold prices down? MCX Gold price trend Triggered by the Iran war, a geopolitical-driven energy shock has translated into renewed inflation concerns, prompting a sharp repricing in interest rate expectations. Prior to the escalation in Middle East tensions, markets were pricing in more than two rate cuts; this has now shifted toward expectations of roughly 40 basis points of tightening by year-end, reflecting a more hawkish policy outlook.
Markets see the US Federal Reserve hiking rates in October this year and March next year. Why should that matter? It does because gold is a non-yielding asset; it doesn’t earn any income. Rate hikes tend to make bonds more attractive and also strengthen the US dollar. Gold has also failed to benefit from safe-haven demand, as inflation concerns stemming from elevated oil prices have instead fuelled expectations of tighter monetary policy. Even as oil prices have moderated, central banks remain cautious and are pivoting away from accommodative stances to anchor inflation expectations.
The US Dollar Index has strengthened to a multi-year high, adding further downward pressure on gold. The US economy’s reduced sensitivity to oil shocks has helped contain downside growth risks, limiting recession fears despite higher energy prices. Consequently, recession probabilities over the next 12 months remain contained, reducing the urgency for safe-haven allocations. Continued ETF outflows reflect weakening investor sentiment, with holdings declining by 3.6 Moz since the onset of the conflict and net outflows of 1.63 Moz year-to-date.
Elevated price volatility and positioning-driven moves have also discouraged fresh buying interest. When will gold recover? (Disclaimer: Recommendations and views on the stock market, or any other asset classes or personal finance management tips given by experts and analysts are their own. These opinions do not represent the views of The Times of India.)
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