Gold Correction of 26% Sparks Buying Opportunity Debate
Gold has experienced a significant correction, dropping about 26% from its January peak of $5,595 to around $4,130 per ounce in early October. In India, the decline is slightly less pronounced at 23%, with the MCX gold price falling from a record Rs 1,93,096 to approximately Rs 1,49,000. Tata Mutual Fund suggests this correction presents a better entry point for long-term investors, recommending staggered purchases rather than chasing short-term fluctuations.
The drop in gold prices is attributed to macroeconomic factors, including a surge in US 10-year Treasury yields to around 5.3%, the Federal Reserve's first rate hike since 2023, and persistent oil-led inflation. These elements make non-interest-bearing assets like gold less attractive compared to bonds. However, central-bank buying and geopolitical uncertainties continue to support gold's long-term appeal.
Analysts have varying forecasts for gold's future price. Wells Fargo predicts a target range of $6,100 to $6,300, while technical models suggest a potential retest of $3,600 to $3,700. Tata Mutual Fund advises gradual buying with a long-term horizon, cautioning against borrowing to invest in gold. The festive and wedding season in India may also influence demand, but investors should remain mindful of risks such as higher yields, Fed policy changes, and potential rupee appreciation.