Gold demand may pick up as easing US-Iran tensions cool prices, encourage festive buying: Experts
New Delhi, July 27
The pause in hostilities between the US and Iran is expected to support gold demand in India by cooling prices and reducing volatility, encouraging consumers who had delayed purchases to return to the market ahead of the festive and wedding season, industry experts said.
Colin Shah, Managing Director of Kama Jewelry, said the de-escalation in geopolitical tensions has eased the risk premium in gold prices, creating an opportunity for buyers who had been waiting on the sidelines.
"The reported pause and de-escalation in US-Iran tensions have brought a temporary breather in terms of a natural cool-down in gold prices. While this reduces the risk premium, it simultaneously has made both international and domestic buyers vigilant and cautious when it comes to gold-buying," Shah said.
He added that the softer prices are expected to help clear inventories before the festive season.
"The good part is, this will encourage the fence-sitters to make a purchase and thus, smoothen the inventory pile-up ahead of the festive and wedding season," he said.
According to Shah, consumers are likely to remain value-conscious and increasingly opt for lightweight plain and studded jewellery as they adopt a conservative approach amid recent volatility in gold prices driven by geopolitical developments.
Meanwhile, Manav Modi, Commodities Analyst at Motilal Oswal Financial Services, said gold prices remained supported by a weaker US dollar despite easing geopolitical tensions.
He noted that the pause in military action between the US and Iran over the weekend, coupled with a more than 5 per cent decline in crude oil prices, has eased immediate concerns over supply disruptions through the Strait of Hormuz and the Red Sea, helping reduce near-term inflation fears.
Modi said investors are now focused on the US Federal Reserve's policy meeting later this week. While interest rates are widely expected to remain unchanged, markets will closely watch the central bank's commentary on the future rate path and inflation outlook, which is likely to be the key driver for gold prices in the near term.
— ANI
Reader Comments
Good analysis by experts, but I think the real driver will be the Fed's decision this week. If they signal rate cuts, gold will shoot up regardless of Iran tensions. The US dollar weakness is already supporting prices. Indian buyers should act fast if they see a temporary dip - don't wait too long expecting a big crash.
Finally some respite for the common man! Gold prices were getting out of hand. But I'm still skeptical - these geopolitical tensions can flare up anytime. The Middle East situation is unpredictable. Better to buy in small quantities for now and not put all savings into gold at once. Safety first, as we say. 🛡️
I'm cautiously optimistic. The article mentions 'temporary breather' - that's the key word. With US elections coming up and global uncertainties, gold will remain volatile. For middle class families, it's better to treat this as an opportunity to buy jewellery for weddings rather than investment. Gold as investment requires patience. Just my two paise. 💰
I agree with Colin Shah - the light weight jewellery trend is sensible. Why waste money on heavy sets that will sit in lockers? Modern designs with studded pieces are more wearable and practical. Good to see Indian consumers becoming value-conscious rather than just buying gold for status. This shift is long overdue. 👍
I would advise everyone to not get too excited. This is just a temporary pause in tensions, not a resolution. The Strait of Hormuz issue remains. Also, gold prices are still high compared to last year. The festive buying might pick up but at a slower pace. Experts
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