Gold and silver prices continued to decline on Thursday, November 12, with both precious metals extending losses amid concerns that stronger-than-expected US inflation could keep interest rates higher for longer.
On the Multi Commodity Exchange (MCX), December gold futures were trading at ₹1.38 lakh per 10 grams, down 0.93%. December silver futures declined 1.32% to ₹1.82 lakh per kg.
The latest fall comes amid pressure on international bullion prices, with gold slipping below the psychologically important $4,000-per-ounce level. Stronger US inflation data has strengthened expectations of further monetary tightening by the US Federal Reserve, lending support to the dollar and US Treasury yields.
Why are gold and silver prices falling?
US consumer inflation rose 0.4% in October, against market expectations of 0.3%, according to market commentary shared by bullion industry participants. The higher-than-expected reading has raised concerns that the Federal Reserve may maintain a restrictive monetary policy for longer or consider another rate increase.
A stronger dollar and rising US bond yields tend to weigh on gold because the precious metal does not offer interest income. Higher yields make interest-bearing assets relatively more attractive, while a stronger dollar makes bullion more expensive for holders of other currencies.
“Gold and silver futures are facing renewed pressure as stronger-than-expected US inflation data has strengthened expectations of further Federal Reserve tightening,” said Vikram Subburaj, CEO of Giottus.com.
Silver is also exposed to changes in industrial demand, making its price movements sensitive to both investment sentiment and expectations of economic growth.
What is the outlook for gold and silver?
According to Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions and president of the India Bullion and Jewellers Association (IBJA), gold has slipped below the $4,000-per-ounce support level and could test $3,900 an ounce if the weakness persists.
Silver, meanwhile, is awaiting a decisive move out of the $51-$53-per-ounce range, he said.
However, continued purchases by central banks are providing some support to gold prices.
Manav Modi, Commodities Analyst at Motilal Oswal Financial Services, said sustained buying by the People’s Bank of China and other central banks is helping limit the extent of the correction.
Investors will watch upcoming US inflation and producer price data, along with commentary from Federal Reserve officials, for further clues on the interest rate outlook.
For Indian investors, the rupee’s movement will also remain important. A weaker rupee can cushion the impact of falling international gold prices on domestic rates, while a stronger rupee can amplify the decline.
What should investors watch?
The near-term direction of gold and silver will depend on US inflation trends, the dollar, Treasury yields and central-bank buying. Investors should also track the rupee-dollar exchange rate when assessing domestic bullion prices. Short-term price volatility makes it important to avoid reacting to individual sessions and to consider investment time horizons before making fresh allocations.
NOTE TO READERS
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.