On the Multi Commodity Exchange (MCX), gold futures for October delivery fell ₹544, or 0.35%, to ₹1.55 lakh per 10 grams. The contracts saw a business turnover of 9,895 lots.
Silver futures for December delivery declined ₹2,535, or 1.04%, to ₹2.41 lakh per kg, with 4,317 lots changing hands.
The fall in domestic prices came as global bullion prices also moved lower. Gold futures in New York declined 0.36% to $4,457.60 an ounce, while silver was down 1.78% at $65.01 an ounce.
Why are gold and silver prices falling?
Analysts attributed the decline in Indian gold prices mainly to weaker spot demand. Silver prices also came under pressure as market participants reduced their positions.
According to Gaurav Garg, head of research at Lemonn, gold and silver declined as higher US Treasury yields and renewed inflation concerns linked to rising oil prices reduced demand for non-yielding precious metals.
The rupee was around ₹95.68 against the US dollar, while higher crude prices added pressure on the Indian currency.
What is the outlook for gold?
Prithviraj Kothari, managing director of RiddiSiddhi Bullions and president of the India Bullion and Jewellers Association, said gold and silver had eased as expectations around a September US rate hike faded, while markets awaited the Federal Open Market Committee minutes for further policy signals.
Kothari said recent US jobs, inflation and retail-sales data had increased the market’s expectation of a rate hold. A weaker rate outlook can support gold by reducing concerns around higher yields and improving the appeal of the non-yielding asset.
Will festive demand support gold in India?
Despite elevated prices, physical demand for precious metals remains firm, according to Darshan Desai, CEO of Aspect Bullion & Refinery.
Desai said the upcoming festive and wedding season could provide additional support to physical gold demand in India, with gold continuing to be used for investment, gifting and wealth preservation.
However, high prices could lead consumers to opt for lightweight jewellery, coins and smaller-ticket purchases, he said.
Desai expects some consolidation and profit-booking after the recent gains but said the broader outlook for precious metals remains constructive.
What about silver?
Silver has been more volatile than gold and is facing pressure from both investment sentiment and industrial-demand expectations.
Desai expects silver to attract greater interest because of its dual role as an investment asset and an industrial commodity.
For Indian consumers, however, near-term prices will continue to depend on global bullion prices, the rupee-dollar exchange rate and domestic physical demand.
