The global market indicators have led to a substantial fall in gold and silver prices. Yesterday, there was a sudden drop in prices on the MCX. Gold fell by more than ₹3,000, and silver rates also saw a similar decline. This downturn is due to weaknesses in global markets. Additionally, hopes of reduced trade tensions between the US and China, coupled with a strong US dollar, have significantly driven down these metal prices.
Price Decline on MCX
On Tuesday, gold opened at ₹1,20,106 per 10 grams with a 0.7% decline, and silver at ₹1,42,366 per kilogram with a 0.69% decrease on the Multi Commodity Exchange (MCX). At market close, gold had fallen by 2.06% to ₹1,18,461 per 10 grams, and silver by 1.36% to ₹1,41,424 per kilogram. However, today there are signs of a slight recovery in gold and silver prices.
Gold and Silver Both Cheaper than Record Highs
According to MCX, gold had reached a record high of over ₹1.32 lakh, but is currently at ₹1.18 lakh. Therefore, gold prices have fallen by over ₹13,000 from their peak. Similarly, silver, once at a record high of ₹1.70 lakh per kilo, has now decreased to ₹1.41 lakh per kilo, reflecting a drop of nearly ₹29,000.
Reasons Behind Price Drop
This correction follows two months of strong gains, primarily due to profit-taking among traders. Rahul Kalantari, Vice President of Commodities at Mehta Equities Limited, explained that after two months of robust gains, gold and silver prices have come under severe selling pressure, as both metals fell below key psychological levels. Gold is priced at $4,000 and silver at $47 per ounce. The decline is attributed to the strong dollar index and renewed optimism over US trade talks with China and India.
Experts also noted that shifting geopolitical concerns, particularly those involving Gaza peace talks, have reduced the demand for safe-haven investments. However, they also highlight that a weaker rupee is providing some underpinning for precious metal prices. Kalantari suggested that globally, gold has found support around $3,940-$3,905, with resistance levels at $4,055-$4,100.
Focus on Central Banks
Investors are closely watching for interest rate cuts by central banks. Recently, soft inflation data has led to expectations that the US Federal Reserve might announce a 25 basis point rate cut, while the European Central Bank and the Bank of Japan are likely to keep their current policies unchanged. If this occurs, further declines in gold and silver prices could follow.
Short-term Indications for Further Decline
Darshan Desai, CEO of Aspect Bullion and Refinery, stated that short-term trends depend on developments in trade talks and policy announcements. He highlighted that expected trade agreements between the US and China and a strong US dollar could weaken safe-haven demand, causing continued price declines in gold.
He further mentioned that there might be fluctuations in these prices in the short term. He added that prices could face additional pressure if the Federal Reserve indicates less aggressive interest rate cuts than anticipated.
