Gold Rates Witness Significant Correction Amid Profit Booking and Volatility
Gold prices have experienced a notable correction over recent trading sessions, primarily driven by profit booking at elevated levels. MCX gold April contracts have declined by nearly 18% from their peak, accompanied by high volatility that raises concerns about potential further price adjustments. Despite this downturn, most market analysts suggest a sharp, sustained drop is unlikely, as fundamental factors continue to underpin the precious metal's value.
Steady Central Bank Accumulation and Geopolitical Uncertainties Support Gold
Key drivers such as geopolitical tensions, geoeconomic risks, central bank purchases, and expectations of US Federal Reserve rate cuts remain firmly in place. The People's Bank of China has notably accumulated gold for fifteen consecutive months, with official data from February 7 indicating a surge of 40,000 troy ounces in January alone. This persistent buying by central banks highlights sustained demand despite gold's sharp rally over the past year.
Anindya Banerjee, Head of Commodity and Currency Research at Kotak Securities, expressed a bullish long-term view, citing central-bank accumulation, fiscal expansion, and currency debasement as enduring supports. However, he cautioned that gold is not a one-way trade, noting that short-term corrections of around 10% are common after sharp rallies, often triggered by profit-taking, temporary equity strength, or shifts in market positioning.
Technical Outlook and Potential Corrections in the Near Term
In the Indian context, a move toward ₹1.4 lakh per 10 grams would represent approximately a 10% correction, which is technically feasible. Banerjee pointed out that significant rupee appreciation could also contribute to local price declines, but in dollar terms, the broader upward trend persists, with any correction likely cyclical rather than structural.
Jigar Trivedi, Senior Research Analyst at IndusInd Securities, echoed a positive undertone, attributing it to ongoing geopolitical and geoeconomic issues, the US Fed's policy stance, and safe-haven buying. He emphasized that while the outlook remains bullish, volatility is expected given recent appreciation. Trivedi identified strong support levels near $4,900 per ounce for Comex gold and ₹1,50,000 per 10 grams for MCX gold April contracts.
Investment Strategy: Buying on Dips as Structural Outlook Stays Robust
Experts recommend purchasing gold during price dips, as the structural outlook remains strong. Vandana Bharti, Head of Commodities Research at SMC Global Securities, highlighted that while tactical corrections cannot be ruled out, a drift in MCX gold toward ₹1.4 lakh is improbable without a major structural shock in global markets. She advised against writing off gold's bull run prematurely, even as equities attract flows due to improving US-India trade dynamics and stabilizing Nifty levels.
Currently, MCX Gold is trading near ₹1.57–1.58 lakh per 10 grams. For prices to fall toward ₹1.4 lakh, an additional 10–12% decline from present levels would be necessary. However, recent price behavior indicates that the ₹1.40–1.45 lakh zone is a strong area of institutional demand. In January 2026, monthly net inflows into gold ETFs more than doubled from December to ₹24,039 crore, underscoring sustained retail investor appetite for safe-haven assets.
Market Signals and Risk Factors Influencing Gold Prices
Bharti noted that when prices briefly dipped below ₹1.4 lakh on February 1 amid budget-led volatility, they quickly recovered in a V-shaped pattern, suggesting large players view levels below ₹1.45 lakh as deep-value accumulation zones. Moreover, geopolitical risks, such as US-Iran tensions and broader global uncertainties, continue to sustain a risk premium in gold, preventing a complete downside unwind.
Central banks' consistent buying as part of diversification away from the US dollar creates a structural demand base that acts as a soft floor for prices, even if retail investors temporarily rotate funds into equities. According to Bharti, only a strong equity breakout, a sharp rally in the US dollar index above 105–106, and sustained de-escalation in global geopolitical tensions could trigger a sharp selloff, potentially dragging MCX gold decisively below ₹1.4 lakh per 10 grams.
Consolidation and Strategic Buying Opportunities Ahead
Until such triggers materialize, gold is likely to consolidate in a broad range between ₹1.48 lakh as support and ₹1.60 lakh as resistance. Any decline toward ₹1.45–1.48 lakh should be seen as a buying opportunity for long-term hedging rather than a signal of structural weakness. Waiting exclusively for ₹1.4 lakh may result in missing accumulation zones where smart money is already positioning, Bharti advised.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms. Investors are advised to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
