Gold Declines Close To 2% After Initial Gains In December: 3 Reasons For Weakness

After climbing almost 5% so far in December considering Tuesday's price, gold again retreated lower by a steep 1.8 percent on the MCX on December 9, 2020.

Gold Declines Close To 2% After Initial Gains In December: 3 Reasons For Weakness

Reasons for weakness in gold

1. This was as the optimism around Covid 19 vaccine which is being now administered in Russia has fuelled inclination for risky assets.

2. At the same time, there has been a surge in global equities which on Tuesday's overnight session in the US hit a record high on the Nasdaq and S&P while in India also it climbed to a new high on Wednesday.

3. Another reason which dragged the gold prices is the redemption from gold ETFs, while it has been reported that corpus in India gold ETFs has remained almost constant, there is offloading from gold ETFs in the gold market. "Gold ETF holdings decreased by 107 tonnes (t) during the month - US$6.8bn or 2.9% of assets under management (AUM) - as the gold price had its worst monthly move (-6.3%, US$1,763/oz) since November 2016, when it dipped 7.4%," WGC said.

Gold Price Outlook Positive In Medium To Long Term

Notably, the phenomena of high volatility shall remain in case of gold, but the medium to long term prospect of the precious yellow metal is highly promising and there are several reasons due to which investors' can remain bullish on the commodity.

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