India Gold fell over 1% in November; Re, trade deal to dictate trend in December

December 02
17:02 2019

For December, gold prices can be volatile on the back of a possible US and China trade deal and also the performance of rupee, Jateen Trivedi, Senior Analyst – Commodity & Currency at LKP Securities, says in an interview to Moneycontrol’s Kshitij Anand.

Edited excerpts:

Q) How did gold move in India in November?

A) Gold prices for November witnessed selling pressure after touching high levels of 38,500, and then touching a low of 37,445, which translates to a 1,000 point drop of around about 2.60 percent in MCX for November.

On a monthly closing basis, gold closed around 1.25 percent lower in November from the previous month in the domestic markets.

But, there is a huge difference in the drop in domestic and Comex prices. The Comex Gold Futures in November registered a high of $ 1,518 at a time when MCX Gold was hovering around Rs 38,500, but Comex gold touched a low of $ 1,450, a drop of more than 4 percent.

This happened mainly because of the US economy, which started cashing in the sentiments of a stronger economy on the back of the US-China trade deal going through (which is still pending).

Back home, the Indian market saw rupee depreciating till 72, which kept MCX prices in a lesser weaken zone as compared to Comex.

Gold witnessed selling pressure on the back of riskier assets like equities performing on the back of US-China trade deal optimism (money shifting from gold to risky assets).

Q) How is gold likely to move in December?

A) For December, the trajectory can be on the volatile side on the back of a possible US and China trade deal going through. But, it is still a 50-50 on Deal or No Deal overhang.

Till the time no specific numbers get announced, there can be unpredictable rallies on any surprise outcome or hints. With a new set of tariffs from the US on China to come into effect from December 15, 2019, I expect prices to remain in a broader range of Rs 37,500 as a very strong base-demand level, and Rs 3600-38,800 as the supply zone.

Historically, gold prices have taken strong support in times of uncertainty on economic performance, which we have witnessed in our current millennium era twice. First, during the 2008 economic crash when gold prices witnessed very strong rally, and in the past year, gold has rallied strongly due to the US-China tariff war.

Q) Any important factors which could impact India Gold in December?

A) The most important factor which will affect the prices of gold in India in December is the progress on the US-China trade deal, a news which shall give both sides pendulum moves due to regular unconfirmed tariff updates.

The other important factor and a worry point is Indian rupee, which has witnessed 72 highs in November and in the past few days, it has taken strong support around Rs 71.30-71.50/USD.

If the rupee weakens again towards 72 per USD and starts trading below it, we can expect gold prices to scale higher.

On the flip side, if the rupee gains strength and scales beyond 71 and starts trading above 71 then gold prices shall find it difficult to break the resistance of Rs 38,500-38,800 zone.

Overall, I expect gold prices to move in a broad range in December, and in case of progress in the trade deal, we shall witness a strong weakness towards 36,000.

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