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Gold prices are anticipated to experience a market correction in the near term, specifically a decline in prices, despite a recent period of significant gains. According to a report by ICICI Bank Global Markets, gold prices are projected to fluctuate within a range of $3,050 to $3,250 per ounce during the second quarter of 2025. This forecast follows a period of substantial appreciation, with gold prices rising by nearly 25 percent between January and April of 2025. However, over the past two weeks, there has been a correction of approximately 4 percent, indicating a shift in market dynamics. This pullback is attributed to several factors, primarily the easing of concerns regarding global trade conflicts and a subsequent reduction in safe-haven demand. The truce between the United States and China, a 90-day agreement, has played a crucial role in alleviating market anxieties and contributing to the moderation of gold prices. The impact of geopolitical events and international relations on the gold market is a recurring theme, highlighting the commodity's sensitivity to global uncertainties.
Data from the World Gold Council (WGC) provides further insights into the underlying trends influencing gold prices. The WGC data reveals that investment demand for gold was remarkably strong in the first quarter of 2025, with a year-on-year increase of 170 percent. This surge in demand was largely fueled by investor uncertainty surrounding the policies of the Trump administration and the ongoing trade disputes that characterized the period. Investors often turn to gold as a safe-haven asset during times of economic or political instability, seeking to preserve their capital amid uncertainty. The heightened demand in the first quarter of 2025 reflects this pattern, as investors sought refuge in gold amid concerns about the potential impact of trade wars and policy shifts. However, the subsequent improvement in diplomatic ties between the US and China has tempered market concerns, leading to a decrease in safe-haven demand and contributing to the recent price moderation. The report also points out that the slowdown in central bank gold purchases appears to be a temporary phenomenon. Central banks often hold gold as part of their reserves, and their purchasing activity can significantly influence gold prices. A temporary slowdown in purchases does not necessarily indicate a long-term trend and should be interpreted with caution.
The elevated prices of gold have had a notable impact on jewellery demand, which has been subdued in recent times. Higher gold prices make jewellery more expensive, potentially discouraging consumers from making purchases. This trend is expected to persist in the near term as gold prices remain relatively high. The ICICI Bank Global Markets report explicitly states that a mild correction in gold prices cannot be ruled out in the near term, particularly if the United States is successful in making trade deals with the rest of the world. The ability of the US to forge trade agreements could further alleviate market anxieties and contribute to a more stable global economic environment, potentially leading to a further reduction in safe-haven demand for gold. The report was quoted by news agency ANI, adding credibility to the information.
In the Indian market, MCX gold prices stood at Rs 92,480 per 10 grams on Saturday. Domestic prices have remained relatively steady, mirroring global weakness. Additionally, the appreciation of the Indian rupee against the US dollar has provided some support to domestic gold prices. A stronger rupee makes gold imports less expensive, potentially mitigating the impact of global price fluctuations. Gold imports have also moderated, with April imports at USD 3.1 billion compared to USD 4.5 billion in March. This decline is consistent with reduced jewellery demand because of higher prices, reflecting the price elasticity of demand for gold jewellery. Higher gold prices tend to suppress jewellery demand, leading to a decrease in gold imports.
Looking ahead, ICICI Bank expects Indian gold prices to maintain an upward trajectory, ranging between Rs 92,500 and Rs 94,500 per 10 grams in the second quarter of 2025. Furthermore, there is potential for prices to reach Rs 96,000 to Rs 98,000 per 10 grams in the latter half of the year. These projections suggest a bullish outlook for gold prices in the Indian market, driven by a combination of factors, including global demand, currency movements, and domestic economic conditions. It's important to consider these expectations when analyzing the possible future trends for the gold market in India. These fluctuations highlight gold's position as both an investment haven and a commodity closely tied to economic tides. The interplay of trade deals, central bank policies, and currency fluctuations will likely continue to shape the narrative of gold prices in the coming year. Traders and investors need to watch these variables carefully to strategically navigate this metal market.
Source: Gold prices undergoing short-term correction, prices in $3,050–$3,250 per ounce range in Q2: Report