Gold Prices in India Have Slipped: A Deep Dive into the Reasons

If you’ve been tracking the gold market recently, you’ve likely noticed a downward trend. After a period of strong performance, gold has taken a breather in mid-August 2025, leaving many investors wondering about the reasons behind this shift.

This dip isn’t due to a single cause but a combination of global economic signals and domestic market behaviour. Let’s break down the key factors driving this change.

Key Takeaways

• Global Pressure: A strengthening US Dollar and rising US bond yields are making gold, a non-yielding asset, less attractive to international investors.
• Profit-Booking: Many domestic investors who bought at lower prices are cashing in on recent highs, leading to increased selling pressure and a price correction.
• Easing Tensions: Speculation about potential de-escalation in global geopolitical conflicts can reduce the demand for gold as a safe-haven asset.

The Global Connection: Why the World Economy Matters

Gold is a global commodity, and its price in India is heavily influenced by international market dynamics. Two major factors are currently at play:

1. The Strong US Dollar: The US Dollar has been gaining strength. When the dollar is strong, it becomes more expensive for holders of other currencies, like the Indian Rupee, to buy gold. This dynamic tends to push gold prices down. For instance, the US Dollar Index (DXY), which measures the dollar against a basket of currencies, was seen consolidating around the 98.50 mark on August 12, 2025, ahead of key inflation data.

2. Rising Bond Yields: US bond yields have been on the rise. Bonds are another safe investment option. When their yields (the return an investor gets) increase, they become more appealing compared to gold, which offers no interest or dividends. The US 10-Year Treasury yield, a key benchmark, was around 4.29% on August 13, 2025. This increased opportunity cost of holding gold prompts some investors to shift their money from gold to bonds.

Adding to this, signs of easing geopolitical tensions can reduce the immediate need for “safe-haven” assets like gold, further dampening its price.

Domestic Dynamics: Profit-Booking and Investor Sentiment

On the home front, a primary reason for a price drop is often simple: profit-booking. After a significant rally, many investors who bought at lower levels may choose to sell and lock in their gains.

For example, on Monday, August 11, 2025, MCX Gold futures contracts could see a drop as investors decide it’s a good time to cash out. A look at the price changes for 24-carat gold on August 12, 2025, showed the price per 10 grams at ₹1,01,400, a decrease from ₹1,02,280 the previous day.

Here’s a quick look at the price changes for 24-carat gold per gram around that time:

• August 10: ₹10,304
• August 11: ₹10,228
• August 12: ₹10,140

This steady decline highlights the selling pressure in the market.

What Should Investors Watch Now?

The future direction of gold prices hinges on a few key events. The most immediate is the release of July’s inflation data from both the US and India.

• If inflation is higher than expected: Central banks might consider more aggressive policies, which could further strengthen the dollar and put more pressure on gold.
• If inflation is cooling: It might signal a less aggressive stance from central banks, potentially offering some support to gold prices.

Analysts suggest gold may be in a consolidation phase, trading within a range. For the near term, spot gold has key support and resistance levels that investors are watching closely. For example, on August 12, 2025, spot gold was trading around $3,350 per ounce.

The Bottom Line

The recent dip in gold prices is a classic example of how interconnected global and domestic factors influence the market. While the long-term outlook for gold is supported by factors like central bank buying and its role as a hedge against uncertainty, the short-term trend is being dictated by a strong dollar, rising yields, and profit-taking.

For investors, this could be a period of “wait and watch.” Keeping a close eye on upcoming inflation data and global geopolitical developments will be crucial to understanding where the precious metal is headed next.

This article is for informational purposes only and does not constitute investment advice. Please conduct your own research before making any investment decisions.