Gold’s Recent Dip: A Healthy Reset or Trend Reversal? Experts Explain Why It’s Business as Usual
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Gold prices took a sudden plunge last week, falling between 8 and 12 percent from their recent highs. The drop came right after a spectacular rally that pushed the metal to record levels around Diwali. In India, domestic prices had surged 16 percent in just the past month, driven by a weaker rupee and strong global demand. Yet analysts remain calm, describing the decline as a normal pause rather than the end of the upward trend.
The main force behind gold’s strength lies in a global shift away from the US dollar. Central banks, particularly in emerging markets, have steadily increased their gold holdings. A decade ago, gold made up only 4 percent of their foreign reserves; today that figure stands at 9 percent. In developed economies, the share is even higher, reaching 20 percent. This diversification reflects growing concerns over the dollar’s long-term dominance amid rising geopolitical tensions and economic uncertainty.
Anindya Banerjee, head of currency and commodities at Kotak Securities, expects the current dip to last for the next eight to ten weeks. During this period, prices may move sideways in what he calls a “time correction.” Over the longer term, however, he sees the dollar weakening further over the next four to five years, which would provide fresh momentum for both gold and silver to climb to new peaks.
In India, physical demand remains robust. Gold imports jumped from 5.44 billion dollars in August to 9.6 billion dollars in September, fueled partly by festive buying. Colin Shah, managing director of Kama Jewelry, views the recent fall as a predictable adjustment after an extended rally. He emphasizes that gold continues to serve as a reliable hedge against inflation and a safe asset during uncertain times. In a low-interest-rate environment, its appeal is likely to persist through 2025 and into 2026.
Investors appear to agree. Many treat the dip as a buying opportunity, adding to their positions rather than selling in panic. Shah notes that price increases confirm gold’s underlying value, while temporary declines offer strategic entry points for those building long-term allocations.
Meanwhile, India’s equity markets present a stark contrast. The Nifty and Sensex have delivered only modest gains of 9 percent and 8 percent respectively this year, with mid- and small-cap segments performing even worse. Weak corporate earnings, patchy consumer spending, and potential trade pressures from the United States have dampened enthusiasm for stocks.
Independent consultant Ambareesh Baliga sees the equity slowdown as a natural reset after the post-pandemic boom. He advises investors to focus on balanced asset allocation, with gold playing a central role. Looking ahead, he believes gold prices will increasingly respond to their own supply and demand dynamics rather than dollar movements alone.
For now, the outlook remains positive. Short-term volatility may continue, but the structural reasons supporting gold—central bank purchases, dollar diversification, and its role as a store of value—show no signs of fading. As global uncertainties linger, the yellow metal retains its shine as a cornerstone of prudent portfolios.
