On the Multi Commodity Exchange (MCX), gold futures for October delivery fell ₹437, or 0.28%, to ₹1.54 lakh per 10 grams. The contract saw a business turnover of 848 lots.
Silver futures for September delivery declined ₹836, or 0.35%, to ₹2.36 lakh per kg, with 857 lots changing hands.
Analysts attributed the fall in gold to weaker spot demand, while a sell-off by market participants weighed on silver.
What is driving gold prices?
Gold has remained supported by expectations of a softer US interest-rate environment.
Anand K Rathi, Co-Founder of MIRA Money, said gold has gained around 10-11% in dollar terms over the past month, driven by several factors, including expectations of lower yields, weaker US employment data, continued Chinese gold purchases and a softer US dollar.
Gold tends to benefit when yields and the dollar weaken because the metal becomes relatively more attractive compared with interest-bearing assets.
Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions, President of the India Bullion and Jewellers Association (IBJA) and Chairman of Jain International Trade Organisation, said gold has been holding near a two-month high as traders assess US inflation data and look for clues on the Federal Reserve’s rate path.
Kothari said gold’s move above the $4,200-an-ounce level could open the way towards $4,500 an ounce, with support around $4,350 an ounce. For silver, he sees a move above $63 an ounce as opening the possibility of a rise towards $70-71 an ounce.
Why US data matters for Indian gold prices
The US interest-rate outlook remains a key driver for international bullion prices and, in turn, domestic gold rates. Lower interest rates generally reduce the opportunity cost of holding gold, which does not generate interest income.
Darshan Desai, CEO of Aspect Bullion & Refinery, said bullion prices remain supported as investors track US inflation data for clues on the future direction of monetary policy. He noted that a softer inflation reading could strengthen expectations of a more accommodative rate environment, while a stronger reading could trigger short-term profit booking and volatility.
For Indian investors, global gold prices, the rupee-dollar exchange rate and domestic demand all influence local bullion prices. This means a fall in international gold prices does not always translate into an equivalent decline in domestic rates.
Despite Thursday’s decline, analysts continue to see gold and silver as important stores of value and portfolio diversification assets, although elevated prices could lead to greater short-term volatility.
-With agencies inputs
