Diwali 2025 gold crash: Gold prices fell sharply on the MCX on Saturday as investors booked profits after the yellow metal reached record highs. The fall comes amid a stronger US dollar and hopes that trade tensions between the US and China may ease. President Donald Trump said a 100 per cent tariff on China would be unsustainable, which also calmed markets. On the MCX, gold December futures dropped 2 per cent to settle at ₹1,27,320 per 10 grams. US gold futures also fell over 2 per cent to $4,213.30 per troy ounce in the previous session.
Despite the recent fall, gold has performed very well this year. In the domestic spot market, gold prices have surged over 70 per cent. This rise is due to global political and economic uncertainties, strong central bank buying, hopes for US Fed rate cuts, and strong inflows into exchange-traded funds (ETFs).
Sugandha Sachdeva, Founder of SS WealthStreet, explained the reason behind this year’s rally. She said, “The rally in gold this year is not merely a reaction to traditional risk factors. It reflects a tectonic shift underway in the global financial system: a move away from a US dollar-centric world toward a multi-polar, asset-backed ecosystem.” She added, “In this transition, gold is reasserting its role as a universal currency, one that transcends political agendas and monetary interventions.”
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According to Mint, Sachdeva also said “Gold’s strength has been reinforced by persistent geopolitical risks, US trade policy uncertainty, inflationary pressures, the monetary easing cycle of the US Fed, accelerating de-dollarisation, continued central bank accumulation, strong ETF inflows and the most recent US government shutdown.”
She noted that over the past five years, gold has delivered a CAGR exceeding 17 per cent. She warned that gold appears overbought in the short term and a correction is possible, but after a pause, gold could reach ₹1,45,000 to ₹1,50,000 per 10 grams or around $4,770 per ounce.
1. Stronger US Dollar
The US dollar index has fallen over 9 per cent this year and stayed below 100 since May. Gold is priced in dollars, so a weak US currency makes it cheaper in other currencies. Experts say if the US dollar rises above 100, gold could face pressure.
2. Shift in US Fed Policy
The market expects two rate cuts by the US Federal Reserve this year. Sugandha Sachdeva said, “The Federal Reserve has guided toward two rate cuts this year. However, if it pivots to a more hawkish tone, gold could face headwinds.” A more aggressive Fed could make gold less attractive.
3. Easing Geopolitical Tensions
Geopolitical risks have boosted gold this year. Experts believe that if conflicts like Russia-Ukraine are resolved or ceasefires occur in the Middle East, gold prices may fall. Sachdeva said, “Signs of diplomatic progress, such as ceasefires in the Middle East, or a resolution in the Russia-Ukraine conflict, could reduce the geopolitical risk premium priced into gold.”
4. End of US Trade Disputes
The ongoing US government shutdown and trade tensions with China have increased gold’s safe-haven demand. Sachdeva said, if these issues are resolved, the demand for gold could decrease. A positive meeting between President Trump and Chinese President Xi Jinping in the next two weeks could lower gold prices.
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5. Trump Selling US Gold Reserves
Experts have suggested a hypothetical scenario where the US might sell gold reserves to manage the shutdown or reduce debt. Ross Maxwell, Global Strategy Lead at VT Markets, said, “If the US under Donald Trump started selling its gold reserves while global prices are at record highs, the move would have a significant impact on the markets. The immediate and most obvious effect would be downward pressure on gold prices.”
He added, “Domestically, the proceeds could help reduce debt or fund spending, but the US would lose a key asset that hedges against currency and market shocks, reducing diversification.” Maxwell noted that large-scale sales are difficult because US gold is under strict Treasury and Federal Reserve oversight and needs congressional approval.
