The price of 24-carat gold slipped by ₹10 in early trade on Friday (July 26), with ten grams selling at ₹69,810, according to the GoodReturns website. Silver also dropped by ₹100 to sell at ₹84,400 per kilogram.

This downward trend in gold and silver prices has raised questions about whether now is the right time to buy.

Reasons behind the price drop

The recent fall in gold and silver prices can be attributed to the announcement in the Finance Minister’s Budget, which included a cut in Customs duty from 15% to 6% for both metals.

This reduction in Customs duty also extends to platinum, which has been adjusted to 6.5%.

As a result, the cost of importing gold and silver has decreased, leading to a drop in domestic market prices.

Over the past three days, gold prices have seen a decline of ₹5,000 per 10 grams.

Global trends and outlook

Globally, gold was on track for a weekly loss, despite a slight firming of prices on Friday ahead of a key US inflation reading.

Spot gold rose 0.4% to $2,374.14 per ounce, but it was still down 1% for the week.

US gold futures climbed 0.7% to $2,371.00.

Renisha Chainani, Head Research at Augmont – Gold For All, noted, “The US Bureau of Economic Analysis announced that the economy grew at a 2.8% annualised rate in April-June, compared to a 1.4% increase in the previous quarter and a 2% forecast. The $2,350 per ounce level is crucial; if gold remains above this level, we may witness a positive turnaround or at least a consolidation period, with upward resistance at $2,385 per ounce, $2,400 per ounce, and $2,425 per ounce. Meanwhile, if gold prices sustain below $2,350 per ounce (₹67,400 per 10 grams), we can expect a downfall up to $2,300 per ounce (~₹66,000 per 10 grams).”

Sugandha Sachdeva, founder of SS WealthStreet, a New Delhi-based research firm, noted, “Currently, the precious metal is seeing a cool-off period before prices potentially start marching higher in the last quarter of this year.”

“With near-term support at $2,280, we believe gold can hit $2,680 by the end of this year when we start seeing rate cuts,” she was quoted as saying in a Reuters report.

The US presidential election and US-China trade tensions are key triggers that could lead to a rebound in prices.

Market focus on Friday was on the June US personal consumption expenditure (PCE) data, the Federal Reserve’s favoured measure of inflation.

Data released on Thursday (June 26) showed that the US economy grew faster than expected in the second quarter, but inflation pressures subsided, maintaining expectations of a September rate cut.

Investment considerations

Experts believe this may be a good time to buy gold.

Jateen Trivedi, VP Research Analyst – Commodity and Currency at LKP Securities, stated, “The pressure is attributed to ongoing profit booking, as the anticipated September rate cut had been priced in. However, there is a high possibility that it could be a one-time cut before a pause, especially with the upcoming US elections in November 2024. Gold will now take cues from the Fed’s policy review on July 31.”

Rahul Kalantri, VP of Commodities at Mehta Equities Ltd, added, “Gold and silver showed heavy sell-off after the Chinese central bank surprisingly cut its one-year lending rate by 20 basis points to 2.30%. The Chinese economy is under steep pressure, and its central bank has also stopped buying gold for its reserves for the last three months. Chinese demand concerns have hit precious metals hard in the international markets.”

Kalantri noted that gold has support at $2,358-2,340 per ounce, with resistance at $2,400-2,418 per ounce, while silver has support at $27.78-27.55 per ounce and resistance at $28.25-28.48 per ounce.

In India, gold has support at ₹67,220-66,900 per 10 grams, with resistance at ₹67,790-68,100 per 10 grams, and silver has support at ₹80,850-80,180 per kg, with resistance at ₹82,420-83,200 per kg.

Gold’s all-time high was around ₹75,000 per 10 grams, and with prices now below ₹70,000, there is potential for prices to rise again.

Jigar Kumar Soni, President of the Ahmedabad Jewelers Association, stated, “Gold may reach around ₹69,000, but there is a possibility of returning to all-time highs by Diwali. The affinity for gold in India is growing, and any slight dip in prices encourages buying.”

As gold and silver prices continue to fluctuate, investors and consumers should consider global trends and domestic factors when making purchasing decisions.