Gold Prices Face Pressure Due to Strong Dollar and China Tax Changes; Indian Demand May Offer Support

Gold prices have seen pressure, recently dipping below $4,000 per ounce. This is attributed to a strengthening US dollar index, which tested 100 levels, and conflicting views from the US Federal Reserve on the economy and interest rates, exacerbated by the government shutdown halting economic data releases.

Further pressure came from China's Ministry of Finance reducing the VAT exemption on gold purchased via the Shanghai Gold Exchange and Shanghai Futures Exchange from 13% to 6%, effective November 1, 2025. This change disappointed investors by removing a significant tax advantage for gold trading in China.

In the near term, gold is expected to trade with limited upside, potentially seeing consolidative moves around ADP employment numbers. On a longer-term basis, gold is still considered a favorable commodity due to peak wedding season demand in India starting mid-November, and seasonally strong demand in December and January.

On MCX futures, Gold (currently around Rs 1,20,950) faces resistance between Rs 1,23,000 – 1,24,600, with support at Rs 1,18,000 – 1,17,600 per 10 gm.

Concerns over economic risks from the prolonged US government shutdown, geopolitical tensions, and trade uncertainties could provide a tailwind for gold in December, potentially leading to a year-end rally.

Impact This news directly impacts gold commodity prices and trading strategies for investors. It highlights currency fluctuations (US Dollar) and geopolitical events (US shutdown, trade tensions) as key drivers. For Indian investors, the seasonal demand provides a specific positive factor. Rating: 7/10

Difficult Terms: Spot Gold: The price of gold for immediate delivery and payment, traded on the spot market. Dollar Index: A measure of the value of the US dollar relative to a basket of foreign currencies. Federal Reserve: The central banking system of the United States, responsible for monetary policy. VAT (Value-Added Tax): A consumption tax placed on a product whenever value is added during each stage of the supply chain, from production to the point of sale. MCX futures: Futures contracts traded on the Multi Commodity Exchange of India, representing an agreement to buy or sell a commodity (like gold) at a predetermined price on a future date. Geopolitical tensions: Conflicts or potential conflicts arising from the interaction of geography, politics, and international relations.