Spot gold eased about 0.3% to near $4,694 per ounce, while COMEX gold futures hovered at $4,713 an ounce, down 0.58% in early trade. Silver mirrored the trend, with spot prices around $75 per ounce and COMEX silver declining 1.23% to $75.47 an ounce.
What’s driving the decline?
The current weakness in bullion is being shaped by a mix of macroeconomic and geopolitical factors:
- Stronger dollar: A firmer US dollar makes gold and silver more expensive for holders of other currencies, typically reducing demand.
- Rising oil prices: Gains in crude have revived inflation worries, which in turn reinforce expectations that central banks — particularly the US Federal Reserve — may keep interest rates higher for longer.
- Geopolitical uncertainty: Stalled US-Iran peace efforts and continued disruptions to Middle East energy flows have added to market volatility, indirectly influencing safe-haven assets like gold.
Higher interest rates tend to weigh on gold and silver because they do not offer yields, making interest-bearing assets more attractive in comparison.
A pause after a strong rally
The decline also follows a period of strong gains. Gold had rallied for four consecutive weeks before posting a 2.5% drop last week, suggesting the current move may partly reflect profit-booking and market consolidation rather than a structural shift.
Demand signals remain mixed
Interestingly, physical markets tell a slightly different story. Gold premiums in India have climbed to their highest levels in over two months due to tighter supply, while buying interest in China has picked up — indicating that underlying demand has not weakened significantly.
At the same time, holdings of the SPDR Gold Trust, the world’s largest gold-backed ETF, edged lower by 0.2%, pointing to some moderation in institutional flows.
What to watch next
The immediate focus for markets is the upcoming US Federal Reserve policy decision. Any signal on the future path of interest rates could play a decisive role in shaping bullion prices in the near term.
Outlook: Short-term pressure, long-term support
Industry voices suggest that while volatility may persist, the broader outlook for gold remains constructive. Colin Shah, Managing Director of Kama Jewelry, said the recent correction comes after a strong rally and has been driven by geopolitical tensions, higher oil prices and a stronger dollar.
“With emerging prospects for a ceasefire, it looks promising that gold prices will start rallying again as demand gets reinstated,” he said.
Shah added that consumer behaviour is also evolving, with buyers prioritising quality and design over quantity — a trend that reflects sustained confidence in gold as an asset.
He expects demand to remain robust even if geopolitical risks ease, underlining gold’s role as a dependable safe haven. While gains may be more gradual, prices could potentially move towards the $5,000 an ounce mark over the course of the financial year.
