Gold and silver prices witnessed a fall in India on Wednesday as a stronger US dollar, rising oil prices and fears of higher interest rates triggered heavy selling in global bullion markets.
Rs 2,677 or 1.76% to Rs 1,49,766 per 10 grams, while prices fell Rs 4,347 or 1.82% to Rs 2,34,181 per kilogram, according to the latest market data.
The fall came after international prices slipped to their lowest level in nearly 11 weeks. Spot gold was trading around $4,181 per ounce after falling about 1.9%, while US gold futures for August delivery declined 1.9% to $4,204.70 per ounce.
The biggest reason behind the fall is a change in expectations around US interest rates.
A stronger dollar has made dollar-priced commodities such as gold more expensive for buyers using other currencies, reducing demand. At the same time, higher oil prices have increased concerns about inflation, leading investors to expect that the US Federal Reserve could keep interest rates higher for a longer period.
Higher interest rates usually hurt gold because the precious metal does not offer any fixed income, unlike bonds and other interest-bearing assets.
Ilya Spivak, head of global macro at Tastylive, told Reuters that the decline in gold was mainly driven by changing expectations around US monetary policy.
“The driver really is the shift in Federal Reserve policy expectations, the rise in yields and the rise in the dollar. I think all of those things are weighing on gold,” Spivak said.
According to the CME FedWatch Tool, traders are now pricing in more than a 70% chance of a US interest rate hike by December.
The latest fall in bullion also came against the backdrop of
The after President Donald Trump said Tehran had shot down a US Apache helicopter in the Strait of Hormuz. Iran later said it targeted a US military base in Jordan and 21 other locations in the Gulf in response.
The developments have increased uncertainty in financial markets and pushed investors to reassess the outlook for inflation and interest rates.
According to Kotak Neo Commodity Research, bullion markets saw broad-based liquidation as investors reacted to rising expectations of a US Federal Reserve rate hike following strong US labour market data.
“Spot gold and silver prices tumbled more than 1.5% and 4%, respectively, on Tuesday, settling at fresh 10-week lows near $4,260/oz and $65.3/oz,” the report said.
Kotak Neo added that stronger-than-expected US existing home sales and hawkish signals from the Bank of Japan, including reports of a possible 25-basis-point rate hike, also weighed on precious metals.
The brokerage noted that gold extended its losses below $4,180 per ounce amid renewed US-Iran tensions. It added that markets are now closely watching US inflation data, as a higher-than-expected Consumer Price Index (CPI) reading could put more pressure on bullion by supporting tighter monetary policy.
Gold analysts are watching the $4,100 per ounce level closely.
Spivak said a break below that level could change the broader trend for the precious metal.
“If we can break the $4,100 level, I think the path of resistance fundamentally changes for gold, and we might be starting to look at $3,500 as the next level into the end of the year,” he said.
Other precious metals also remained under pressure. Spot silver dropped 2.1% to $64.01 per ounce, platinum fell 3.4% to $1,667.92, while palladium was down 1.5% to $1,204.24.
Kotak Neo said the broader base metals market showed mixed trends.
Copper remained relatively stable near $13,615 per tonne, supported by long-term demand expectations linked to artificial intelligence infrastructure.
The brokerage said China’s proposed 2 trillion yuan investment in data centre infrastructure highlights the growing importance of AI as a structural demand driver for copper.
However, it added that expectations of tighter US monetary policy and volatility in technology markets may limit near-term gains. At the same time, tighter zinc concentrate availability and limited aluminium supply continue to support the medium-term outlook for base metals.
(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)