Gold prices under pressure ahead of Dhanteras: What should buyers consider

Gold prices have recovered modestly after a sharp sell-off, but uncertainty over US interest rates, inflation and geopolitical developments could keep the metal volatile ahead of Dhanteras.

For consumers planning festive purchases and investors considering gold exchange-traded funds (ETFs), the correction brings affordability and investment allocation into focus.

On the Multi Commodity Exchange (MCX), gold futures for December 4 delivery were trading at ₹1.42 lakh per 10 grams, up 0.39% on October 26.

International spot gold rose 0.4% to $4,010.51 per ounce on Monday (October 26) after falling 4% last week, its steepest weekly decline since June. Softer oil prices offered some relief, although investors remained cautious ahead of the US Federal Reserve’s October 27–28 meeting and upcoming inflation data.

Why are gold prices under pressure?

Gold has faced selling pressure from a stronger US dollar, elevated Treasury yields and changing expectations around US monetary policy. Higher yields make interest-bearing assets relatively more attractive than gold, which does not generate regular income.

Manav Modi, commodities analyst at Motilal Oswal Financial Services, said elevated energy prices had raised concerns about persistent inflation and limited flexibility for the Fed. The direction of bond yields and the central bank’s guidance on future rate decisions will be important for bullion.

Anand K Rathi, co-founder of MIRA Money, also pointed to competition from dollar-denominated assets offering yields of around 5–5.1% as a factor affecting gold’s appeal. He expects gold to remain under pressure until there is greater clarity on the dollar and US Treasury yields.

However, gold continues to draw support from geopolitical uncertainty and its role as a portfolio diversifier. The current correction reflects competing influences rather than a single driver.

Gold outlook ahead of Dhanteras: What should buyers consider?

Festive and wedding demand is providing support to India’s gold market, although high prices continue to affect affordability.

Darshan Desai, CEO of Aspect Bullion & Refinery, said seasonal demand is supporting domestic bullion buying, but consumers are becoming more cautious because of elevated prices.

The World Gold Council’s October 20 India market update said the recent price decline has supported jewellery demand, with retail footfall and retailer orders improving. Jewellers are also focusing on lightweight designs and old-gold exchange options as consumers adjusted to high prices. However, growth in sales value does not necessarily translate into equivalent growth in the quantity of gold sold.

Amit Modak, director of PNGS, said retailers would need to focus on affordability, product mix and inventory management. For consumers, the decision to buy jewellery should depend on their budget and purchase needs, rather than an expectation that prices will rebound immediately.

Gold ETFs: Does the correction offer an investment opportunity?

Indian gold ETFs attracted approximately ₹4,450 crore in net inflows in September, the highest monthly inflow in seven months, according to the World Gold Council. Holdings increased to around 124 tonnes, indicating continued investor interest in gold as a diversification asset.

However, strong inflows do not guarantee that prices will recover in the near term.

Nirpendra Yadav, senior research analyst at Bonanza, advised investors against panic selling or making large lump-sum purchases amid volatility. Those investing for the long term could consider staggered purchases through gold ETFs or other suitable investment avenues, while reviewing their existing allocation.

Rathi suggested keeping gold to around 5–10% of a portfolio, depending on the investor’s circumstances, and avoiding indiscriminate buying after sharp price declines. This is his suggested allocation range, not a universal rule.

Investors should consider their financial goals, existing exposure to gold through jewellery and other investments, and ability to withstand further price declines before adding to their holdings.

What could move gold prices next?

The Fed’s policy decision, its guidance on future interest rates, US inflation data, Treasury yields and the dollar will remain key near-term triggers. In India, rupee movements will also influence domestic prices.

Modi said the interaction between energy prices, inflation expectations and monetary policy would remain important for bullion. Yadav added that geopolitical uncertainty and global economic concerns could continue to support gold’s longer-term role in portfolios.