Gold and silver prices declined on the Multi Commodity Exchange of India (MCX) on Wednesday, October 21, as rising crude oil prices fuelled inflation concerns and strengthened expectations that the US Federal Reserve could maintain a tighter monetary policy for longer.
MCX December gold futures were trading at ₹1.46 lakh per 10 grams, down 0.35%, while December silver futures fell 1.20% to ₹2.08 lakh per kg.
The decline comes amid heightened geopolitical uncertainty, concerns over energy supplies and uncertainty about the US interest-rate outlook. Both precious metals have been under pressure in recent sessions, with investors tracking crude oil prices, the US dollar and expectations around the Federal Reserve’s next policy moves.
Why are gold and silver prices falling?
Rising crude oil prices are fuelling inflation concerns
Higher crude oil prices can push up transportation, manufacturing and other costs, raising concerns about inflation. This could make it harder for central banks, particularly the US Federal Reserve, to ease monetary policy.
Ashish Rajodiya, Head of Commodities at PL Capital, said early optimism over a possible Iran peace deal had faded after reports of a potential agreement were disputed, allowing crude prices to recover.
Supply concerns linked to tensions in the West Asia and threats to shipping routes have also kept oil-market volatility elevated. If crude prices rise further, expectations of tighter monetary policy could weigh on gold and silver.
US Federal Reserve rate expectations are weighing on bullion
The Federal Reserve’s October 27-28 meeting is another key factor for precious metals. While markets broadly expect the US central bank to hold interest rates at the October meeting, the possibility of a rate hike later in the year remains a concern.
Higher interest rates tend to weigh on gold because the metal does not pay interest. When yields on interest-bearing assets rise, the opportunity cost of holding gold increases. Silver can also come under pressure as investors reassess the outlook for interest rates and economic growth.
Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions Ltd. and president of the India Bullion and Jewellers Association, said oil-driven inflation concerns and expectations around the Fed’s policy decision were keeping gold and silver under pressure.
The dollar and bond yields remain important triggers
Movements in the US dollar and Treasury yields influence international bullion prices. A stronger dollar can make gold and silver more expensive for buyers using other currencies, potentially reducing demand. Rising bond yields can also make non-yielding gold less attractive.
Investors are also watching upcoming US inflation data, including the Personal Consumption Expenditures (PCE) report, for clues about the likely path of interest rates.
For Indian buyers, the rupee-dollar exchange rate is an additional factor. A weaker rupee can increase the domestic cost of imported gold and silver, even when international prices are unchanged or falling.
What are the key gold and silver levels to watch?
According to Kothari, international gold prices are holding a support zone of $4,080-$4,200 an ounce. A sustained move above $4,200 an ounce could open the way towards $4,400 an ounce, while a break below the support zone could expose gold to further downside towards $3,950 an ounce.
For international silver, the $57 an ounce level is an important support. A decline towards $54-$55.50 an ounce remains a downside possibility, while a sustained move above $59 an ounce could open the way towards $62 an ounce.
For domestic futures, Vikram Subburaj, CEO of Giottus.com, identified ₹1.45 lakh per 10 grams as an important support level for MCX December gold, with a recovery above ₹1.47 lakh per 10 grams potentially signalling near-term stabilisation. For silver, he identified support near ₹2.08 lakh per kg and said a sustained move above ₹2.13 lakh per kg would strengthen recovery prospects.
These levels are market participants’ technical assessments, not assured price targets. They may change as market conditions evolve.
Will festive demand support gold prices in India?
Domestic festive and wedding demand could offer some support to gold, even as international prices remain volatile. However, higher prices and sharp price movements may keep consumers cautious about the timing and size of purchases.
Darshan Desai, CEO of Aspect Bullion & Refinery, said recent price corrections had encouraged some buying, although consumers remained price-conscious. He added that global economic data, Federal Reserve signals and currency movements would be important drivers for bullion in the coming week.
Domestic demand, however, may not be sufficient to offset sustained weakness in international prices, particularly if crude oil remains elevated and expectations of tighter US monetary policy persist.
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.