A stronger US dollar is generally negative for gold because the yellow metal is priced globally in US dollars, making it more expensive for foreign buyers and therefore dampening demand.On the MCX, February gold futures ended Rs 20,514 lower, or 12%, at Rs 1,50,440 per 10 grams. On the international market, spot gold fell 9.5% to $4,883.62 an ounce at 1:57 PM ET (1857 GMT), after prices rose to a record peak of $5,594.82 on Thursday. US gold futures for February settled 11.4% lower at $4,745.10.
Traders reassessed the market and turned to profit booking after the yellow metal rose to fresh record highs of Rs 1,82,130 earlier this week. Experts noted that the sharp rise in recent weeks left prices vulnerable to a correction.
“The main trigger was President Trump’s appointment of Kevin Warsh as the next Chairman of the US Federal Reserve. Mr. Warsh, known for his hawkish stance on inflation control and emphasis on Fed independence, led to a rapid macro repricing: the US dollar strengthened, real interest rates rose and leveraged positions in gold and silver, seen as overextended hedges against degradation, were quickly unwound,” said Ponmudi R, CEO of Enrich Money. This led to violent liquidations, wiping out billions in market value and washing away weak hands in what he described as a classic euphoria-to-exhaustion phase, rather than signaling a structural bear market reversal.
Despite the severity of the pullback, the secular bullish structure heading into 2026 remains firmly intact, he added. The key drivers remain, with ruthless central bank purchasing being the most important. The correction serves as a healthy reset, clearing away excess debt, speculative froth and overbought conditions, positioning the market for more sustainable upside potential once sentiment stabilizes and buy-on-dip rates return. “Caution is warranted in the short term due to the strength and volatility of the dollar, but medium to long term forecasts remain firmly bullish,” Ponmudi said. Domestic broker Motilal Oswal said gold now appears relatively better positioned as macro uncertainty increases. While maintaining a positive view on the longer-term structural outlook for silver, supported by industry supply and demand constraints, the brokerage warned that the near-term situation appears increasingly unbalanced following the recent rally.
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What should investors do on February 1?
The Multi Commodity Exchange of India (MCX) will remain open for trading in a special session on Sunday, February 1, as the government presents the Union Budget 2026. The exchange will conduct a live trading session as per standard market timings.
On January 30, domestic gold mirrored the global sell-off, retreating from highs around Rs 1,80,000+ to stabilize around Rs 1,49,500 to Rs 1,49,653, reflecting a similar percentage decline. The contract is trading near the 20-day EMA with the long-term upside channel remaining intact. The key support is in the zone of Rs 1,40,000 to Rs 1,45,000, supported by the firm USD/INR backdrop. A position above Rs 1,40,000 maintains the positive medium-term bias, while a sustained recovery above Rs 1,55,000 in the coming months could fuel momentum towards Rs 1,65,000 to Rs 1,80,000+, supported by domestic tailwinds and structural demand.
Despite the sharp decline, gold remains on track to rise more than 13% this month, marking its sixth consecutive monthly increase.
(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)
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