On the Multi Commodity Exchange (MCX), gold contracts for October delivery fell ₹462, or 0.3%, to ₹1.52 lakh per 10 grams, while silver contracts for December delivery declined ₹975, or 0.41%, to ₹2.36 lakh per kg.
Gold futures declined 0.84% to $4,492.68 an ounce in New York, while silver was down 0.63% at $65.79 an ounce.
Why are gold and silver prices falling?
The immediate pressure on both precious metals came from stronger US labour-market data, which has increased expectations of tighter monetary policy.
US non-farm payrolls rose by 162,000 in August, nearly three times the market expectation of around 53,000.
Ashish Rajodiya, Commodity Research Analyst at PL Capital, said the stronger jobs data revived expectations of a September Fed rate hike.
Higher interest rates and bond yields typically increase the opportunity cost of holding gold and silver, which do not generate interest income. A stronger dollar can also weigh on dollar-denominated bullion.
Gaurav Garg, Head of Research at Lemonn, said gold and silver remain under pressure following the jobs data, with markets now looking to US inflation readings for further clues on the Fed’s policy path.
What does the rupee mean for MCX gold and silver?
For Indian investors, movements in the rupee also matter because bullion prices are linked to international prices and the currency in which imports are settled.
A stronger rupee can moderate the impact of international price gains on domestic bullion, while a weaker rupee can add to local prices.
Rajeev Sharan, Head of Research at Brickwork Ratings, expects gold to remain under pressure over the next two weeks. He said healthy FCNR(B) deposit inflows have helped support the rupee, which in turn can keep domestic gold prices in check.
The rupee was around ₹94.42 to the US dollar on Monday, according to Garg.
Can higher crude prices support gold and silver?
The rise in crude oil prices is providing a counterforce to the pressure from higher US rate expectations. WTI crude has moved above $92 a barrel, while Brent has approached $97 amid renewed geopolitical tensions involving the US and Iran.
Higher oil prices can fuel inflation concerns, potentially supporting demand for precious metals as a hedge. However, persistent inflation could also make it harder for the Fed to ease monetary policy, which would be negative for gold and silver.
For silver, the outlook is somewhat more complicated because the metal has a significant industrial-use component. Rajodiya noted that elevated oil prices can raise input costs for industries while silver demand remains linked to sectors such as solar, electronics and semiconductors.
What could happen to gold and silver prices next?
The next major trigger will be US inflation data. The Producer Price Index (PPI) and Consumer Price Index (CPI) are due this week, ahead of the Federal Reserve’s policy meeting later this month.
Sharan expects the Fed’s September 16 decision to be particularly important. A rate hike or a hawkish policy signal could push Treasury yields higher and put further pressure on bullion. Conversely, a softer-than-expected policy signal could quickly revive demand for gold and silver.
Will festive demand support Indian bullion prices?
Domestic demand could offer some support as the festive and wedding season approaches. Darshan Desai, CEO of Aspect Bullion & Refinery, expects physical demand and festive buying to gradually strengthen, particularly for gold coins, bars and customised bullion, although he expects volatility to continue.
Dishi Somani, founder of Dishis Designer Jewellery, said buyers should keep in mind that bullion prices can move quickly because of changes in global economic conditions, currencies and geopolitical developments. For jewellery buyers, she said the decision is not determined by the day’s gold price alone, with factors such as purity, design and craftsmanship also influencing purchases.
