On the MCX, October gold futures were trading around ₹1.50 lakh per 10 grams, down 1.06%, while September silver futures were at ₹2.32 lakh per kg, lower by 1.38%, around 10:02 am, according to market data.
Gold has now seen a sharp correction from its recent levels.
Why are gold prices falling?
The latest decline is largely linked to changing expectations around US interest rates.
Markets are now pricing in about a 68% probability of a Federal Reserve rate hike this month, according to the CME FedWatch Tool. Higher interest rates and bond yields increase the opportunity cost of holding gold and silver, which do not generate interest income.
At the same time, the US dollar has strengthened to a two-week high. Since gold is priced in dollars globally, a stronger US currency makes bullion more expensive for buyers using other currencies.
Renewed US-Iran tensions have added to the pressure. Higher oil prices have raised concerns that an energy shock could keep inflation elevated, making it harder for the Fed to ease policy.
“Gold dropped to a three-week low Wednesday as escalating U.S.-Iran tensions pushed oil prices higher, stoking inflation and rate-hike concerns ahead of key U.S. jobs data,” said Prithviraj Kothari, Managing Director at RiddiSiddhi Bullions and President of the India Bullion and Jewellers Association.
What does this mean for gold investors?
Piyush Jhunjhunwala, Founder & CEO, Stockify, said the current weakness comes after a strong August for gold and could partly represent a correction after the recent rally.
He said gold is facing near-term pressure from rising crude oil prices, US Treasury yields and expectations of higher interest rates. However, inflation concerns and geopolitical tensions could continue to provide longer-term support to the metal.
The immediate focus is now on US economic data, particularly the ADP employment report and Friday’s non-farm payrolls data. Strong labour-market data could reinforce expectations of tighter monetary policy, while weaker numbers could ease rate-hike bets.
Silver prices today
Silver has also extended its decline on the domestic market. MCX silver futures fell nearly 1% to ₹2.33 lakh per kg, marking the fourth consecutive session of losses, according to the data provided.
In global markets, Comex silver was around $64.57 an ounce, down 1.22%.
Gaurav Garg, Head of Research at Lemonn Markets Desk, said rising US Treasury yields and a stronger dollar had reduced demand for precious metals. He added that higher crude prices could add to inflationary pressures and remain a risk for commodity prices.
Renisha Chainani, Chief Research Officer at Augmont, said silver’s move towards $64 reflected growing expectations of a US rate hike, supported by the recent rise in global bond yields and crude prices.
Kothari expects $60-$61 an ounce to be an important support zone for silver, while gold could find support around $4,200 an ounce.
-With agencies inputs
