Gold Prices Witness Extreme Volatility in Asia Owing to Federal Rates

Gold demand in India saw a slowdown this week as volatile prices discouraged buyers, with many adopting a cautious "wait-and-see" approach. Domestic prices dropped to ₹75,459 ($887.28) per 10 grams earlier this week, down from a high of ₹79,120 last week, but the uncertainty surrounding price stability kept jewellers and consumers hesitant. Dealers in India offered discounts of up to $8 per ounce over official domestic prices, slightly less than last week's $9 discount, reflecting subdued market sentiment.

The market's caution was amplified by external factors, including the rupee hitting a record low and anticipation surrounding the Federal Reserve’s interest rate decision. These developments have also driven many Indian families toward lightweight and lower-carat gold jewellery options as a cost-saving measure. Furthermore, gold imports into India are expected to decline sharply in December due to persistently high prices and weakening demand.

In broader Asian markets, demand was similarly soft. In China, where gold prices have been high, discounts of around $5 per ounce to international prices were offered. Analysts expect some seasonal demand to emerge in January ahead of the Chinese New Year, though the focus is likely to remain on lighter purchases. Japan saw premiums of $1.5 per ounce, while Hong Kong traders reported a $2.00 premium, indicating regional variations in demand dynamics.

Switzerland, a major gold exporter, reported an increase in shipments to India, as well as a recovery in deliveries to China and Hong Kong in November compared to October. However, market participants across Asia continue to grapple with high gold prices and price volatility, factors that are likely to influence demand trends in the coming months.