Gold prices fall over ₹4,000 from record high: Buying opportunity or should you brace for a steeper fall?

Gold prices: International gold prices extended their slide on Wednesday, after recording their worst one-day sell-off in more than five years a day earlier. Gold fell more than 5% on Tuesday in its sharpest drop since August 2020, according to a Reuters report. Spot gold was down 0.4% today at $4,109.19 an ounce, more than 6% lower than its drop from a record high of $4,381.21 on Monday. The local gold market was closed due to a holiday for Diwali in the last session. However, a sharp sell-off cannot be ruled out when the bullion opens for trading in the evening session today. MCX is closed in the morning trade due to Diwali Balipratipada. What is behind gold price decline? From their record high of ₹ 132,294 per 10 grams, gold prices moderated to ₹ 128,000 in the domestic market, down by over ₹ 4,000 or 3%. The latest sell-off in gold prices follows profit-taking by investors amid a record run in the gold market. Gold prices have returned nearly 60% this year, outperforming most major asset classes. Moreover, signs of a thaw in US-China trade relations and a possible positive outcome in India-US trade talks also bolstered risk-off sentiment, driving gold prices lower. US President Donald Trump said he expects to reach a fair trade deal with Chinese President Xi Jinping when the two meet in South Korea next week. Additionally, Mint reported earlier today that New Delhi and Washington are nearing a trade deal that would see US tariffs on Indian imports cut to 15% to 16% from 50%. Investors are now looking forward to the release of the US Consumer Price Index report in September, as it may shed light on the Federal Reserve’s interest rate outlook. Ross Maxwell, Global Strategy Lead at VT Markets, said the gold price rally, fueled by a weaker US dollar, expectations of lower Fed rates, strong central bank purchases and heightened geopolitical risks, faces profit-taking after the record run. However, sustaining the rally could be challenging, especially near the key $4,000-$4,400/us psychological zone, although the broader bullish drivers remain intact, Maxwell said. Gold price crash: Pause or trend reversal? Echoing similar views on gold’s bullish outlook, Harshal Dasani, Head of Business at INVAsset PMS, said that we are living through the third super cycle for precious metals. “History has seen only two true supercycles in precious metals. The first began in the 1970s, when President Richard Nixon decoupled the dollar from gold, dismantled the Bretton Woods system, and unleashed a decade of double-digit inflation and a nearly 20x boom in gold. The second unfolded from 2000 to 2010 as the European crisis eroded faith in fiat currencies Now, between 2020 and 2025, we are living through the third,” said Dasani. What makes this cycle more powerful is the extent of leverage in paper markets, he explained. For every ounce of physical gold, there are nearly 150 paper claims, and for silver more than 350. COMEX short positions sit on a powder keg, while physical inventories at LBMA and Shanghai continue to deplete. That’s why every correction in gold or silver is met with aggressive buying — the market is sensing a potential decline unlike anything seen before, Dasani said. He believes that this current dip makes it a buying opportunity. Commenting on a more immediate outlook for gold, Maxwell said that if the Federal Reserve’s upcoming comments signal deeper rate cuts or geopolitical risks intensify, gold could regain upward momentum. However, a stronger USD or a rise in real yields could lead to short-term corrections of around 5-10%, he warned. “Investors should take a disciplined approach, gradually entering positions using dollar cost averaging, diversifying across instruments, and monitoring key triggers such as US inflation data and Federal Reserve guidance. Gold remains a compelling hedge and portfolio diversifier, but prudent risk management and awareness of volatility is essential to weather the current market phase navigate,” Maxwell added. Disclaimer: This story is for educational purposes only. The opinions and recommendations expressed are those of individual analysts or brokerage firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.