Gold prices experienced a notable decline on Monday, influenced by a stronger U.S. dollar, shifting expectations regarding Federal Reserve rate cuts, and China's decision to remove a tax rebate for certain retailers. The precious metal's retreat comes in the wake of hawkish remarks from Fed Chair Jerome Powell, impacting both spot gold and futures markets. Meanwhile, UBS has identified potential upside risks for gold prices amid market volatility.

Market Movements

Factors Influencing Gold's Decline

1. Stronger U.S. Dollar: The dollar's rise to near three-month highs has put pressure on gold prices, as a stronger dollar typically makes gold more expensive for holders of other currencies.

2. Fed Rate Cut Expectations: Following Chair Powell's comments, market expectations for a rate cut have diminished. Traders now see a 71% chance of a rate cut, down from over 90% previously.

3. Recent Fed Action: The Federal Reserve cut rates by 0.25 percentage points to a range of 3.75%-4.00%, but Powell's hawkish tone has tempered expectations for future cuts.

4. U.S.-China Trade Relations: Easing tensions between the U.S. and China have also contributed to gold's decline. The U.S. President and Chinese President agreed to reduce tariffs, with China committing to address fentanyl trade and resume soybean purchases.

5. China's Tax Rebate Removal: Beijing announced that some retailers can no longer offset value-added tax when selling gold from Shanghai exchanges, leading to a decline in bullion prices.

UBS Forecast and Market Analysis

Despite the current downward trend, UBS has identified upside risks for gold prices. The investment bank projects that the precious metal could reach $4,700 per ounce if political and financial market volatility increases again. This outlook suggests that gold could see significant price appreciation under conditions of heightened market uncertainty.

Technical Analysis

Jateen Trivedi from LKP Securities noted that gold is adjusting to positive US-China trade developments while still pricing in tariff effects and geopolitical risks. Technical analysis shows:

• Resistance: Rs 123,550-Rs 123,950
• Support: Rs 120,172-Rs 119,470
• RSI: 50
• Bollinger Bands and MACD signals: Suggest neutral to bearish momentum

Trivedi recommends a sell-on-rise strategy near Rs 121,300 with a stop loss at Rs 122,500 and targets of Rs 120,000-Rs 119,400.

Gold Prices in India

Gold prices in India reached Rs 121,660 as spot gold fell below $4,000 per ounce. City-wise prices showed:

• Chennai: Rs 121,790 per 10 gm (highest)
• Delhi: Rs 121,230 per 10 gm
• MCX December futures: Rs 122,325

Gold's Performance Context

Despite the recent downturn, gold has shown remarkable performance:

• Year-to-date gain: Over 50%
• Current decline: More than 10% from the record high reached in early October
• Domestic gold prices have corrected 8% from all-time highs of Rs 132,294

Broader Precious Metals Market

The downward trend in gold prices has rippled through the broader precious metals market, with silver, platinum, and palladium all experiencing declines. Silver was trading at Rs 148,860 per kilogram in India.

While gold's recent performance may seem bearish, it's important to consider the metal's significant gains throughout the year and the potential for future appreciation as forecasted by UBS. Investors and market watchers should continue to monitor economic indicators, geopolitical developments, and central bank policies for potential impacts on gold prices in the coming weeks.

Gold prices have dropped below $4,000 following China's decision to end tax rebates, which has reduced demand in the major market. The policy change has resulted in increased costs for retailers and diminished support for gold prices. Despite the price decline, traders are maintaining a calm approach to the market developments.

This recent development comes amid a period of consolidation for gold prices, which have been closely tied to a complex interplay of global economic factors and geopolitical events.

Market Performance

Last week witnessed a significant decline in gold prices across both domestic and international markets:

The downward trend in gold prices can be attributed to several factors:

1. Hawkish Federal Reserve outlook
2. Positive developments in US-China trade talks
3. Strengthening of the US dollar index, which rose above 99.5
4. China's elimination of tax rebates, reducing demand in a major market

Key Focus Areas

Traders and investors are keeping a close watch on several important events and data releases in the coming week:

1. Manufacturing and services PMI data from major economic regions
2. China's trade and growth numbers
3. US private sector data, including:
   • ADP non-farm payroll
   • Consumer sentiment index
4. US Supreme Court's tariff hearing scheduled for November 5

Analyst Projections

Market analysts anticipate continued weakness in gold prices. Some projections suggest that MCX gold could potentially decline to ₹118,000 per 10 grams.

Silver Market Update

In contrast to gold, silver futures on MCX showed positive movement:

• Price change: +₹817 (+0.55%)
• Current price: ₹148,287 per kilogram

This increase marks the end of a two-week losing streak for silver.

Central Bank Gold Purchases

An interesting trend has emerged in the official sector:

• Q3 central bank gold purchases: +28% (year-on-year)
• Full-year official buying expectations: 750-900 tonnes

This surge in central bank gold acquisitions is largely attributed to nations diversifying their reserves away from the US dollar.

As the week unfolds, market participants will closely monitor these key indicators and events, which may influence gold prices in the short to medium term. The interplay between economic data, policy decisions, and geopolitical developments will continue to shape the trajectory of the precious metals market.