Gold price crash ahead of Diwali 2025 has taken both investors and traders by surprise, especially after gold delivered extraordinary returns of more than 70% this year. Just when many believed the yellow metal would continue its unstoppable rally, prices on the MCX dropped by nearly 2%, settling at ₹1,27,320 per 10 grams, while US gold futures also tumbled more than 2%. This sudden decline has created panic among retail buyers and raised the critical question—will Gold Price Crash even more before Diwali, or is this a temporary correction?
To understand this situation, we must look beyond just daily price movements. In India, gold is not just a commodity; it is deeply rooted in culture, tradition, and financial security. Families buy gold during Diwali as a symbol of prosperity and faith. However, this year’s rally was not driven solely by cultural demand or inflation fears. According to experts, gold’s surge came from a tectonic shift in the global financial system, where nations and central banks are gradually moving away from a US dollar–centric structure toward a more diversified, asset-backed approach. Gold is regaining its position as a universal currency and a store of value.
Over the last five years, gold has delivered a remarkable CAGR of over 17%, outperforming many asset classes. Central banks across the world have increased their gold reserves, and ETFs saw heavy inflows. Persistent geopolitical tensions, inflationary pressures, trade disputes, and the US Federal Reserve’s rate cut expectations further fueled this rally. Yet, despite this strength, experts caution that gold prices are entering overbought territory, signaling short-term exhaustion. A healthy correction, both in price and time, is normal after such a massive rally.
So, the key question remains: Can gold prices fall more?
Experts say yes, and here are the five powerful reasons why the gold price crash ahead of Diwali 2025 may deepen before the next major uptrend.
1. Gold Price Crash : Stronger US Dollar – A Direct Threat to Gold
Gold is priced in USD globally. When the US dollar index weakens, gold becomes cheaper for holders of other currencies, boosting demand. Earlier this year, the dollar index stayed below 100, supporting gold’s rally. However, if the dollar makes a sustained breakout above 100, gold could face serious downward pressure. A stronger dollar reduces gold’s attractiveness, making alternative assets more appealing. Rising US treasury yields can also pull capital away from gold.
2. Gold Price Crash : Potential Hawkish Shift by the US Federal Reserve
Markets are currently pricing in two rate cuts by the US Fed, which is positive for gold because lower interest rates make non-yielding assets like gold more attractive. However, if the Federal Reserve turns hawkish due to higher inflation or economic strength, rate cuts could be delayed—or worse, rates could stay high for longer. This scenario creates a negative environment for gold, as investors seek higher returns in bonds or equities instead of safe-haven metals.
3. Gold Price Crash : Easing Geopolitical Tensions Could Reduce Safe-Haven Demand
One of the strongest drivers of gold’s rally in 2025 has been global geopolitical unrest. The Russia-Ukraine conflict, Middle East tensions, and trade disputes increased uncertainty, pushing investors toward gold. But if there is diplomatic progress—such as ceasefires, peace talks, or conflict resolution—gold’s “fear premium” may fade. When fear drops, risk appetite increases, and gold demand naturally slows down. This could trigger a short-term price drop.
4. Gold Price Crash : US-China Trade Relations Improving
Trade tensions between the US and China have historically been a major catalyst for gold prices. However, recent signals suggest relations may improve, especially with the scheduled meeting between President Donald Trump and China’s President Xi Jinping. If trade agreements are reached or the US government shutdown ends, safe-haven demand may decline. Investors may rotate capital into equities or emerging markets, putting pressure on gold.
5. Gold Price Crash : Hypothetical Scenario: US Selling Gold Reserves
Some analysts have mentioned a dramatic but unlikely scenario—the US government selling part of its gold reserves to manage debt or fund the federal government during the shutdown. If such a move occurred, the sudden increase in supply could cause a sharp price drop globally. However, this is highly regulated and would require Congressional approval, making large-scale sales unlikely. Still, even the fear or rumor of such actions can trigger temporary volatility in gold markets.
Gold Price Crash: Long-Term Outlook: Bull Run Intact?
Despite short-term headwinds, many experts maintain a positive long-term outlook. Gold has proven its ability to protect wealth during inflation, recession, and currency crises. Sugandha Sachdeva and other analysts believe that after this healthy correction, gold could resume its upward journey toward ₹1,45,000–₹1,50,000 per 10 grams or around $4,770 per ounce. The structural shift away from the US dollar and continued central bank buying support a long-term bull market.
Should You Buy or Wait?
Smart Strategy: Buy on Dips and in Phases
Instead of panicking, investors should view corrections as an opportunity. Timing the exact bottom is difficult, but systematic investment during dips reduces risk and increases long-term returns. Gold remains a powerful hedge against uncertainty, inflation, and currency devaluation.
Conclusion
The gold price crash ahead of Diwali 2025 may worry investors, but it is part of a natural market cycle. Short-term declines can occur due to a stronger dollar, Fed policy shifts, reduced geopolitical risks, easing trade tensions, or concerns about gold reserve sales. However, the long-term fundamentals of gold remain strong. By staying informed and investing strategically, investors can turn this temporary volatility into a profitable opportunity.
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