Precious metal markets experienced significant losses on Thursday as gold reached a three-month low and silver plummeted almost 50% from its peak earlier this year. The ongoing sell-off is largely attributed to surging crude oil prices, which are reigniting inflation fears, alongside persistent hawkish signals from the U.S. Federal Reserve.
Gold and Silver Extend Losses
Both gold and silver extended their decline in domestic and international markets. In the national capital, gold of 99.9% purity saw a decline of ₹1,000, bringing its price to ₹1.48 lakh per 10 grams, a level not seen since July 30. Silver, meanwhile, bore the brunt of the sell-off, tumbling by ₹5,900 to ₹2,07,500 per kilogram, inclusive of taxes. This marks a 10-month low for silver, which has fallen ₹31,500, or 13.18%, since December 31, and a staggering ₹1.97 lakh per kg, or 48.70%, from its all-time high on January 29.
Global Market Impact and Crude Oil Surge
Globally, spot gold slipped below the $4,100 per ounce mark, dropping by nearly 1.7% to $4,072.30 per ounce. Silver also saw a substantial fall of almost 4% to $55.72 per ounce. Ashish Rajodiya, Head of Commodities at PL Capital, noted that bullion prices traded lower as Brent crude oil surged towards $112 per barrel. This rise in crude prices has intensified inflation concerns and reinforced expectations that central banks will maintain elevated interest rates for an extended period.
Jateen Trivedi, VP Research Analyst at LKP Securities, commented that "Gold continued its weak trend in the domestic markets on Thursday as sentiment remains under pressure amid concerns over the West Asia conflict." Rajodiya added that silver experienced a steeper correction due to its inherently higher volatility.
Federal Reserve Stance and Investor Outlook
Hawkish signals from the U.S. Federal Reserve continue to weigh heavily on both precious metals. Investors are now keenly awaiting the Federal Reserve's monetary policy decision scheduled for October 27-28, along with upcoming U.S. inflation data, for clearer direction. An easing in crude prices and de-escalation of U.S.-Iran tensions could provide some room for bullion to recover, according to analysts.
Gaurav Garg, Head of Research at brokerage platform Lemonn, highlighted the importance of these upcoming economic indicators for market sentiment. He also noted that while the rupee is trading around 94.56 against the U.S. dollar, supported by foreign inflows, elevated crude oil prices remain a critical factor for India's import bill and overall inflation outlook.
In summary, a confluence of high crude oil prices, persistent inflation concerns, expectations of prolonged high interest rates, and geopolitical tensions in West Asia are collectively influencing the downward trajectory of gold and silver prices in both domestic and global markets.