Gold and silver prices declined on the Multi Commodity Exchange (MCX) on Friday, November 6, as investors weighed inflation concerns and the outlook for US interest rates, even as jewellers expected festive purchases to remain strong on Dhanteras.
MCX December gold futures were trading at ₹1.42 lakh per 10 grams, down 1.45%. December silver futures fell 1.65% to ₹1.84 lakh per kg.
The decline in domestic prices comes as buyers head to jewellery stores on Dhanteras, traditionally considered an auspicious occasion to purchase gold and silver.
Why are gold and silver prices under pressure?
Internationally, spot gold fell 0.6% to $4,063.39 per ounce on Friday (November 6), although the metal remained on track for a weekly gain of around 4%.
A rebound in crude oil prices has revived concerns about inflation and strengthened expectations that the US Federal Reserve may keep interest rates higher for longer. Higher interest rates tend to weigh on gold, which does not offer interest income.
Investors are also awaiting the US non-farm payrolls report, which could influence expectations around the Fed’s December policy decision.
Silver, meanwhile, is more vulnerable to profit-taking following its recent rally, given its higher price volatility and exposure to industrial demand.
What are jewellers expecting this Dhanteras?
Despite the correction from January highs, jewellers expect gold and silver sales to increase in value terms this Dhanteras.
According to the All India Gem and Jewellery Domestic Council (GJC), gold and silver sales could rise 20-30% in value terms compared with last year, while gold sales volumes are expected to remain largely flat.
The correction in prices could encourage consumers to make purchases, although buyers are increasingly opting for lightweight jewellery and smaller-ticket purchases.
Rajesh Rokde, Chairman, GJC, said the industry expects flat year-on-year growth in gold sales volumes. The timing of Dhanteras, falling at the beginning of the month, could also support purchases as consumers have their salaries in hand.
Sachin Jain, CEO (India), World Gold Council Regional, said families with weddings scheduled over the next three to six months could advance their purchases following the price correction.
Should investors buy gold as a long-term allocation?
Rishabh Nahar, Partner and Fund Manager at Qode Advisors, said gold should be viewed as a strategic allocation alongside equities rather than merely a festive purchase.
He said the Nifty 50 and gold have delivered annualised returns of around 11-12% in rupee terms over the past 20 years, while having a low correlation with each other.
According to Nahar, holding both assets in a portfolio can help cushion drawdowns during periods when equities or gold underperform. He suggested that gold could account for 30-40% of a portfolio, depending on an investor’s risk appetite, with allocations reviewed annually.
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Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Readers should consult certified experts before making any investment decisions.