India Gold Prices Pullback Hits 2.6% on Dollar Strength

India gold prices pullback October 2025 marked a 2.6% drop in spot gold to USD 4,211.48 per ounce on Friday, October 17, at 4:35 PM IST. This followed a record high of USD 4,378.69 earlier that day. The retreat, driven by a firmer US dollar and US President Donald Trump’s remarks on China tariffs, affected MCX gold futures, which fell 2.1% to INR 1,12,600 per 10 grams. Indian buyers faced premiums at decade highs amid the festive season. Reports from Reuters highlighted the shift, while Economic Times noted potential for further correction toward INR 1,08,000.

Reasons for Gold Price Dip India Amid Global Shifts

The gold price dip India experienced stemmed from multiple pressures. A stronger dollar index, up 0.1%, made the non-yielding asset less attractive. Trump’s comment that a “full-scale” 100% tariff on China would prove unsustainable cooled trade war fears, reducing safe-haven demand. Tai Wong, an independent metals trader, stated, “Trump’s more conciliatory tone since the initial announcement of 100% tariffs has taken a little heat out of the precious trade.”

Reserve Bank of India data showed gold reserves at 879.98 tonnes as of August 2025, with the share in forex reserves rising to 14.7% by October due to price surges earlier in the year. World Gold Council figures confirmed RBI added just 3.8 tonnes in January-August 2025, down from 45.4 tonnes the prior year. This slowdown in purchases amplified the impact of the global pullback on domestic markets.

In Mumbai, jewellers reported steady but cautious demand. One dealer noted buyers held off for deeper cuts, echoing patterns from August when a similar retreat boosted physical uptake. The Economic Times analysis warned of a possible blow-off top, with gold potentially correcting to USD 3,500 amid overbought signals like RSI at 65.

Gold Rate Correction Festive Season India: Buyer Sentiment Tested

Gold rate correction festive season India arrived at a critical juncture. With Diwali in late October, demand typically peaks, yet premiums hit decade highs at USD 50-60 over London fixes. Livemint data for October 18 listed 24-carat gold at INR 1,11,800 per 10 grams in Delhi, down INR 1,200 from Thursday’s peak. This 1% domestic dip offered relief but raised concerns over affordability.

Reasons for gold price dip India included profit-booking after a 64% yearly surge. Geopolitical easing, like the Israel-Hamas ceasefire in early October, further dented momentum. Kotak Mahindra Bank halted new silver ETF investments due to shortages, signaling broader bullion strain. In South Asia, Pakistan and Bangladesh markets mirrored the trend, with PKR gold falling 2% to PKR 500,000 per tola.

World Gold Council research head Kavita Chacko observed, “Gold’s share in RBI’s forex reserves has climbed to 14.7%, its highest since 1996-97, driven by valuation gains despite moderated buying.” This underscores structural support, yet short-term volatility persists.

Impact on Jewellery and Investment Demand

Jewellers in Delhi and Chennai saw footfall rise 15% post-dip, per industry estimates. However, high prices curbed volume, with buyers opting for lighter pieces. Investment channels like gold ETFs added 6.7 tonnes in Q1 2025, the highest on record, per AMFI data. Yet, the pullback prompted caution, with inflows dipping in September.

Standard Chartered Bank’s Suki Cooper forecasted gold averaging USD 4,488 in 2026, citing upside from structural factors. HSBC raised its 2025 average to USD 3,455, projecting USD 5,000 by 2026. These outlooks suggest the current gold rate correction festive season India may prove temporary.

Background: From Rally to Retrace

Gold rallied beyond USD 4,300 per ounce on October 17, setting up a 4.8% weekly gain, the best in five years. Central bank buying, ETF inflows, and rate cut bets fuelled the run. RBI’s reserves topped USD 100 billion for the first time at USD 102.365 billion, per Economic Times citing WGC data. India ranked ninth globally with 888 tonnes in August.

Earlier corrections, like the 8.5% MCX drop to INR 90,890 in May, followed similar triggers: easing US-China tensions and ceasefire news. Quant Mutual Fund warned of 12-15% corrections in June, a pattern repeating now. British English conventions note such cycles align with historical blow-off tops, as in 2006 when gold fell 25% post-peak.

In South Asia, the story matters for remittance-dependent economies. Gold imports, valued at USD 50 billion annually, strain trade balances. A sustained dip could ease inflation pressures in India, where CPI hit 5.5% in September. Neighbouring nations like Sri Lanka, rebuilding reserves, watch closely as gold hedges currency risks.

What’s Next for India Gold Prices Pullback October 2025

Analysts eye USD 4,100 as support, with resistance at USD 4,300. A Fed rate cut on October 30 could reverse the dip, boosting sentiment. Festive sales may absorb the correction, with Diwali projections at INR 1,15,000 per 10 grams if demand holds. Buyers should monitor dollar moves and tariff updates. HSBC’s outlook points to resilience, exact RBI statement on October purchases remains pending. The India gold prices pullback October 2025 tests resolve, yet long-term bulls dominate.

Published in SouthAsianDesk, October 17th, 2025

Follow SouthAsianDesk on X, Instagram, and Facebook for insights on business and current affairs from across South Asia.