Gold and silver prices fell in international trade on Wednesday, October 21, as expectations of tighter US monetary policy weighed on precious metals, even as geopolitical uncertainty and seasonal buying in India offered potential support.
On COMEX, gold futures declined $14.10, or 0.34%, to $4,128.50 per ounce, compared with the previous close of $4,143.40 an ounce. Silver futures fell $0.30, or 0.52%, to $57.70 per ounce, against the previous close of $58.155 an ounce, according to the available market data on October 21.
The near-term outlook for bullion remains caught between opposing forces: expectations of higher US interest rates and elevated energy prices on one side, and central-bank buying, geopolitical risks and India’s festive and wedding-season demand on the other.
Why US rate expectations matter
Gold does not pay interest, making it less attractive when bond yields and interest rates rise. Expectations of further Federal Reserve tightening can therefore weigh on prices, particularly if inflation remains persistent and the US dollar strengthens.
Vikas Gupta, smallcase manager and CEO of Omniscience Capital, said the prospect of higher inflation and interest rates alongside a sustained rise in gold prices presented a challenge for the market outlook.
While central banks could remain significant buyers, Gupta said selling by other investors could offset some of that demand and keep prices in check. He expects Indian gold prices to see a modest festive-season rise before stabilising, while global prices could remain under pressure amid the possibility of further Fed rate hikes.
The interest-rate outlook remains an important variable for bullion markets. A Reuters poll published on October 20 found that economists expected the Fed to hold rates at its October 27-28 meeting but anticipated another increase in December. Persistent inflation and elevated energy prices were among the concerns shaping those expectations.
Why geopolitical tensions are not necessarily lifting gold
Geopolitical risks can support gold’s safe-haven appeal, but their impact is not always straightforward. Tensions that disrupt oil supplies can push crude prices higher, adding to inflation concerns and strengthening expectations that interest rates will remain elevated.
Vikram Kasat, Chief Business Officer – Advisory and Dealing at PL Capital, said Brent crude near $108 per barrel remained a risk to inflation and corporate margins amid heightened geopolitical uncertainty.
For gold and silver, the implications depend on which force dominates: demand for safe-haven assets or pressure from higher yields and tighter monetary policy.
Can festive demand support domestic gold prices?
India’s festive and wedding seasons could provide a cushion for domestic prices, although elevated prices may constrain the quantity of jewellery consumers purchase.
Rajeev Sharan, Head of Research at Brickwork Ratings, said 24-karat gold was trading near ₹1.48 lakh per 10 grams around Dussehra, following a decline of more than 6% in the previous month from record highs. He expects higher US interest rates to limit a sharp rally and sees prices moving within a range of around 5% on either side in the near term.
Sharan also pointed to a change in buying patterns, with households maintaining festive budgets while opting for lighter jewellery or shifting some purchases towards gold coins, bars and exchange-traded funds (ETFs).
Recent market trends indicate that lower prices have helped revive Indian jewellery demand. The World Gold Council said on October 20 that seasonal demand was gathering pace, domestic gold-market discounts had narrowed, and jewellers were reporting healthy order flows ahead of the festive and wedding period. It also noted that elevated prices could continue to limit growth in purchase volumes.
Colin Shah, Managing Director of Kama Jewelry, said the company had observed greater interest in lightweight jewellery and 9-carat pieces during Dussehra, alongside demand for diamond-studded jewellery. These preferences reflect how buyers are adjusting their purchases to manage costs without abandoning festive buying.
Why silver could remain more volatile
Silver shares some of gold’s sensitivity to interest rates and the dollar but also has substantial industrial uses. This means its price can respond to changes in industrial demand and broader economic expectations, in addition to investment flows and safe-haven sentiment.
The metal’s sharper decline in the recent period, as noted by bullion industry representatives, underlines the importance of distinguishing silver’s outlook from gold’s. Even if central-bank purchases and jewellery demand support gold, those factors alone may not be sufficient to drive a sustained silver recovery.
What investors should watch
The immediate direction of gold and silver will depend on US inflation readings, Federal Reserve signals, Treasury yields, the dollar and developments in the West Asia. In India, the rupee and the strength of festive and wedding-season demand will also affect domestic prices.
While price dips may encourage buying, seasonal demand does not guarantee a sustained rally. For now, bullion markets face a tug-of-war between supportive physical and safe-haven demand and the risk that tighter US monetary policy will keep global prices under pressure.
-With Reuters inputs
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Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Readers should consult certified experts before making any investment decisions.