Gold futures for October delivery fell ₹2,045, or 1.31%, to ₹1.54 lakh per 10 grams on the MCX. Silver futures for December delivery declined ₹1,955, or 0.81%, to ₹2.40 lakh per kg.
Globally, gold futures were down 0.51% at $4,432.51 an ounce, while silver fell 1.04% to $68.22 an ounce.
Why are gold and silver prices falling?
The latest correction in bullion prices has been linked to changing expectations around US monetary policy.
According to Gaurav Garg, Head of Research at Lemonn, hawkish comments from Fed Chair Kevin Warsh at Jackson Hole have increased expectations of a September rate hike. Markets are now pricing in a significantly higher probability of a rate increase.
Higher US yields and a firmer dollar tend to weigh on gold and silver because both metals do not offer regular interest income. A stronger dollar can also make dollar-denominated bullion more expensive for buyers in other currencies.
Garg said gold has extended its recent correction, while silver has also remained under pressure.
What is happening with crude oil?
Oil prices have added another layer of uncertainty to the global outlook. WTI crude has moved above $85 a barrel amid escalating US-Iran tensions and concerns over supply disruptions around the Strait of Hormuz.
Higher crude prices could add to inflationary pressures globally. This, in turn, could influence expectations around the pace of interest-rate cuts or hikes and keep markets sensitive to US economic data and central bank signals.
Does the correction change the outlook for gold?
The fall in prices does not necessarily mean that gold’s broader trend has reversed.
Colin Shah, managing director of Kama Jewelry, described the recent decline as a possible phase of consolidation after the sharp rise in gold prices. He attributed the immediate weakness to profit-taking and softer global cues.
For Indian consumers, the correction comes ahead of the festive and wedding-buying season. Lower prices could provide some relief to jewellery buyers, although bullion prices remain volatile and can move sharply with global cues.
For jewellers, a correction can also make inventory restocking relatively more attractive.
What should Indian buyers watch?
For domestic gold and silver prices, three factors will be particularly important in the near term:
- US interest-rate expectations: Any change in expectations around the September Fed decision could affect bullion prices.
- Dollar and US yields: A stronger dollar and higher yields could keep pressure on precious metals.
- Rupee movement: Since India imports most of its bullion, the rupee-dollar exchange rate also influences domestic prices.
With the rupee around ₹95.56 to the US dollar, global bullion movements and currency fluctuations could continue to make domestic gold and silver prices volatile.
