Will the 2013 gold crash repeat? Prices plunge below $4,000 globally

Kochi: Gold prices have witnessed a sharp decline in international markets, raising questions over whether the downward trend will continue in the coming days. The price of pure gold fell to $3,979 per troy ounce (31.1 grams) on Friday, slipping below the psychologically significant $4,000 mark.

The latest decline has brought renewed attention to the possibility of a prolonged correction in gold prices. On October 23, international prices had fallen to $3,990 per ounce before recovering.

With gold once again slipping below $4,000, investors and market participants are closely watching global economic developments, particularly signals from the US Federal Reserve, movements in the dollar and fluctuations in crude oil prices.

What happened during the 2013 gold price crash?

The latest fall has revived memories of the major gold market crash in 2013, when international prices plunged by nearly 30 per cent.

At the time, the US Federal Reserve had signalled that it could begin scaling back its economic stimulus measures. The prospect of reduced monetary support, combined with a strengthening US dollar and investors moving away from gold, triggered a sharp decline in prices. Gold eventually fell to around $1,180 per ounce.

The downturn was further aggravated by a US investment firm's recommendation to its clients to short-sell gold.

Reports that the European Union and the International Monetary Fund had asked Cyprus to sell part of its gold reserves to repay debt also added to the selling pressure.

Could gold prices crash again?

Although further fluctuations are expected, current market assessments suggest that a collapse similar to the one witnessed in 2013 is unlikely.

Several factors are weighing on gold prices, including profit-booking by investors, improved returns on dollar-denominated investments and bonds, and expectations of a possible interest rate hike by the US Federal Reserve at its December monetary policy meeting.

Higher interest rates generally make interest-bearing investments more attractive compared with gold, which does not generate regular income.

However, gold prices could recover if concerns surrounding US interest rates ease and the dollar weakens.

Developments in the crude oil market will also be crucial, as changes in oil prices can influence inflation expectations and, consequently, the Federal Reserve's monetary policy decisions.

Falling gold prices pose opportunities and challenges for jewellers

The decline in gold prices presents both opportunities and challenges for the jewellery industry, according to S. Abdul Nasser, general secretary of the Kerala Gold and Silver Merchants Association (KGSMA).

Lower prices could encourage customers who had postponed purchases during the recent rally to return to jewellery stores, potentially boosting sales.

However, the market could also experience a slowdown if consumers anticipate further price reductions and decide to delay their purchases.

The direction of gold prices in the coming days will therefore be crucial for both retailers and customers.

Kerala gold prices fall Rs 1,240 per sovereign

Gold prices in Kerala registered a steep decline on Friday despite the US Federal Reserve keeping its benchmark interest rate unchanged.

The price of 22-carat gold fell by Rs 1,240 per sovereign (eight grams) to Rs 1,04,320.

The price per gram declined by Rs 155 to Rs 13,040, marking the lowest level recorded since July.

The decline followed indications that the Federal Reserve could consider raising interest rates in December, despite maintaining the current rate at its latest policy meeting.

Rising crude oil prices following Houthi attacks in Saudi Arabia have also emerged as a concern for the gold market.

Meanwhile, reports suggesting the possibility of US military action against Iran following the American midterm elections have added to uncertainty in global energy markets.

Any escalation could push crude oil prices higher, potentially affecting inflation expectations and monetary policy decisions.

Market participants believe these developments have contributed to the latest correction in gold prices, with investors closely monitoring whether the decline will continue or give way to another recovery.