Gold Falls Before India Diwali Buying Season

For consumers, the move improves buying power at the exact moment when bullion purchases typically rise. Festive demand in India is highly price sensitive, and lower prices can unlock pent-up purchases in coins, bars and jewellery after months of record valuations. For retailers, however, the price drop is a double-edged sword. While lower prices can support footfalls, jewelers have so far been reluctant to rebuild inventory aggressively, a sign they are wary of carrying stock into a volatile market and absorbing financing costs if prices fall further.

The market backdrop helps explain the weakness. Gold-linked assets have backed off from stretched technical readings, with the SPDR Gold Shares ETF, GLD, trading below both its 50-day and 200-day moving averages after a steep slide from earlier highs. Its RSI has cooled from overbought levels to the mid-40s, while the MACD remains negative, suggesting momentum has faded even after a short rebound. Newmont, one of the largest gold miners, has also lost altitude from its earlier surge, reinforcing the message that investors are taking profits across the sector.

At the same time, the broader macro picture has not turned decisively hostile to gold. US inflation remains elevated, with the CPI well above pre-pandemic levels, and the dollar remains closely watched as traders reassess the path of real rates. That leaves room for both bulls and bears. Bulls argue that any further weakness could be limited if inflation stays sticky or if investors revive safe-haven demand. Bears say the metal has already enjoyed a powerful rally and that easier supply and profit-taking could keep prices under pressure in the near term.

For investors, the key question is whether this is a healthy correction or the start of a larger reset. If gold holds near current levels through the festive season, India’s physical demand could stabilize, supporting jewellery and bullion-linked businesses. If the slide deepens toward Rs 1 lakh per 10 grams, consumers may step up purchases, but miners and inventory-heavy retailers could face margin pressure before demand fully recovers. Either way, the next few weeks will determine whether the festival season turns gold’s selloff into a buying opportunity.