Gold Drops as Safe-Haven Demand Wanes: Key Levels to Watch

Gold price levels experienced a sharp drop of Rs 4,000 on Monday as geopolitical tensions de-escalated. On the multi-commodity exchange (MCX), the yellow commodity was trading at Rs 92,500 on Monday. While the price levels did witness a minor breather on Tuesday, analysts believe that gold might stay volatile in the coming time as trade tensions ease.

Earlier this week, the US and China struck a deal, implementing a drop in tariff rates for the initial 90 days. As per the new regulations, the US will lower the tariff rates on Chinese imports from 145% to 30%. Meanwhile, China will drop tariff levels to 10% from 125%.

"This announcement triggered a sharp rally in the dollar index, which surged above $101.50, eroding the appeal of gold as a safe-haven asset," said Jateen Trivedi, VP research analyst-commodity and currency, LKP Securities.

On top of this, border tensions between India and Pakistan appear to be easing. "In addition to the tariff relief, geopolitical tensions cooled with signs of a potential truce between Russia and Ukraine, and a ceasefire agreement between India and Pakistan. These developments led to heavy profit booking in gold, which had previously rallied on global uncertainty," Trivedi added.

As per GoodReturns Website, the rate of 24-carat gold (per 10 grams) stood at Rs 95,770 in the Delhi NCR region.

Key Levels to Watch

With geopolitical tensions taking a breather, analysts are expecting the yellow commodity to witness heightened volatility ahead.

On the technical front, MCX Gold saw sharp selling in yesterday’s session, accompanied by a spike in volumes. "Technically, gold now faces immediate resistance in the Rs 94,000–Rs 95,000 range, while the next major support lies at Rs 90,000. With safe-haven demand fading, further downside cannot be ruled out if global risk sentiment remains stable," said Trivedi.

We expect MCX Gold to remain volatile going forward. Currently, support is placed at 92,200, and resistance is at 97,000, according to Way2Wealth Brokers.