World gold prices: Prices are rising, but the appeal is fading.

According to an article in the SCMP, gold is often considered a safe haven, but traders are currently hesitant to buy it due to the potential for price volatility following the US election.

According to traders, gold prices are near record highs, as global economic uncertainty and the upcoming US election are putting downward pressure on buying of the precious metal during India's most prosperous shopping season.

India, one of the world's largest gold consumers, typically sees a surge in demand around Dhanteras, the start of the Diwali Festival of Lights. This is the peak time for gold buying in the country, as it is believed to attract the blessings of the Goddess of Wealth.

In an interview with This Week in Asia, gold dealers and jewelers in India estimated sales would fall by 10-20% compared to last year's peak shopping season. TK Chandran, CEO of DKTM Jewellery Ltd, which operates around 50 showrooms across India, said: "This year, purchases are definitely down compared to last year in terms of volume, although the value of sales remains similar." He added: "Most people are saying that price levels can only change after the US election."

Analysts say the close US presidential election between Donald Trump and Kamala Harris, scheduled for November 5th, means gold prices are likely to remain at current levels for the foreseeable future.

On Tuesday, spot gold prices fluctuated around $2,755.42 an ounce, close to last week's record high of $2,758.37.

Gold is often bought as a hedge during times of uncertainty, and the outcome of the White House race is expected to significantly impact geopolitical conflicts, such as tensions in the Middle East and the Russia-Ukraine conflict.

Analysts noted that Israel's attack on Iran last Saturday, which avoided targeting oil facilities, temporarily calmed the heightened trading sentiment surrounding gold. However, according to this week's ANZ report, the potential shift among investors seeking to diversify their portfolios away from the US dollar ahead of the US presidential election is keeping demand for the precious metal high.

A Mumbai-based jeweler said that buying sentiment in India has shifted significantly since July, when the government reduced the import duty on gold from 15% to 6%. India meets almost all of its gold demand through imports, which rank second in value on its import bill after crude oil. “ When the import duty was cut, sales surged. But the market has dropped 20-30 percent since three months ago,” said a senior executive at one of India’s leading jewelry chains, who declined to be named.

The director said the drop in sales volume has negatively impacted the income of jewelry stores and traders because their profit margins are very thin. Prices are unlikely to rise again from current levels, especially if tensions in the Middle East or the Russia-Ukraine conflict ease, he added.

Gold prices could rise if the US Federal Reserve cuts interest rates at its meeting in the first week of November. In September, they lowered interest rates by 50 basis points, marking the first monetary easing in four years.

According to CME's FedWatch Tool, the market is anticipating a high probability of another 25 basis point interest rate cut. Lower interest rates reduce the opportunity cost of holding gold.

Gold prices are typically inversely related to the USD because the precious metal is priced in this currency internationally. A stronger USD tends to lower gold prices, and vice versa.

Focus on the Fed's interest rate cuts.

Analysts say the Fed could halt interest rate cuts if Trump wins the election, as he has pledged to cut taxes, thereby increasing the deficit, as well as imposing inflationary tariffs on imports.

Gnanasekhar Thiagarajan, founder of CommTrendz Research, said that in the coming period, global investors will closely monitor whether the Fed will cut interest rates again.

Demand for physical gold during traditional peak buying periods may decrease, not only because of high prices but also because consumers are diversifying their investments into alternatives such as government bonds and exchange-traded funds.

But one bright spot for the market is that Indian investors have excess cash after the record surge in the stock market over the past few months.

Mr. Thiagarajan also said that the gold price surge could "deflate" after the US election, once any uncertainty surrounding the outcome is resolved. He also said there are expectations that geopolitical tensions in the Middle East and the Russia-Ukraine conflict may begin to ease in the coming months.

Source: https://baoquocte.vn/gia-vang-the-gioi-gia-tang-nhung-suc-hap-dan-mat-dan-nha-dau-tu-co-nen-tiep-tuc-om-291870.html