Gold Prices Correct as Hawkish Fed Comments Boost Dollar

Gold prices have entered a corrective phase after failing to sustain above Rs 163,000-166,000. The sharp pullback from the upper Bollinger Band indicates profit-booking after the strong upside move seen over previous weeks.

The medium-term case for investment in gold remains intact, according to Manav Modi, Senior Analyst at Motilal Oswal Financial Services Ltd. Despite recent price falls, concerns surrounding rising US fiscal deficits and record government debt levels continue to support the long-term 'debasement trade.'

However, the correction is being driven by higher interest-rate expectations and a stronger dollar, which have reduced the appeal of non-yielding assets like gold.