On Tuesday, gold futures on MCX (Multi Commodity Exchange of India) fell 1.5 percent or Rs 826 to Rs 54,120 per 10 grams, as international rates corrected due to pressure from a stronger dollar. Spot gold was down by 0.5 percent to $2,017.98 per ounce as the American currency firmed up amid tensions between the US and China after Beijing imposed sanctions on American officials.
Gold rates in India have corrected from the over Rs 56,000 levels seen in India and $2,072.50 an ounce hit by spot gold last week. Experts say that apart from the pressure of a stronger dollar, gold prices could be experiencing a consolidated period after rising over 14 percent in three weeks.
The US dollar is considered an alternative safe-haven asset amid political uncertainties.
On Monday, China imposed sanctions on 11 US citizens, including lawmakers from President Donald Trump's Republican Party, after Washington's sanctions on Hong Kong and Chinese officials last week.
Gold has gained over 33 percent in value in 2020, largely due to stimulus rolled out by governments and central banks of all major countries to support their economies amid the coronavirus pandemic. Amid low rates set by central banks to push growth, the precious metal is seen as a hedge against and currency debasement.
However, after the sudden surge of interest in the metal last week, analysts expect gold to remain in corrective mode this week with a further downside in value.
"Gold trade attracted a lot of fast money last week, and I believe a washout of speculative long positioning sets gold up for a more balanced rally going forward," said Jeffrey Halley, a senior market analyst at OANDA, to Reuters.