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Sharp drop in gold and silver prices: silver fell to 200 thousand rupees, gold also got cheaper
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Aaj Tak
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Sharp drop in gold and silver prices: silver fell to 200 thousand rupees, gold also got cheaper

The commodity market is witnessing a significant decline in the prices of gold and silver, considering December futures. At 20:00 trading time, the price of silver futures dropped by approximately 8000 rupees, while the price of gold decreased by 2500 rupees.

Such a sharp drop in gold and silver prices on MCX is usually not observed on ordinary days, but it happened suddenly on Thursday. It is expected that this decrease in gold and silver futures may affect the Indian market on Friday.

On MCX on Thursday, the price of 10 grams of gold fell to 143,600 rupees, and the price of silver based on December futures decreased by approximately 8300 rupees, reaching the mark of 250,000 rupees. This decline is occurring not only in India but also globally.

In the global market, the price of gold fell by 1.82% and is trading at $4074.37 per ounce. Silver also showed a substantial drop, losing more than 4% and settling at $55.408 per ounce.

The main reasons cited for such a sharp decline are the rise in crude oil prices, inflation concerns, and the likelihood of maintaining high interest rates in the US. Despite increased tension in the Middle East, gold has not received sufficient support as a safe-haven asset due to three key factors.

Firstly, there is the surge in crude oil prices. Following tensions in Houthi territory, the conflict spread to Saudi Arabia, where the Houthis launched a series of attacks. Furthermore, the closure of the Red Sea route hinders the supply of Saudi oil to the market. As a result, crude oil prices exceeded $112 per barrel.

Secondly, there are concerns regarding the Federal Reserve's rate. The market expects the Fed to keep rates unchanged at the October meeting, but there is a possibility of a rate hike in December.

Thirdly, there is the rise in US Treasury bond yields. The yield on two-year US Treasury bonds reached a weekly high, making income-generating instruments like bonds more attractive to investors and putting pressure on gold.

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Sharp drop in silver and gold prices on the MCX exchange
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Sharp drop in silver and gold prices on the MCX exchange

On the Multi Commodity Exchange (MCX), precious metal prices experienced a sharp decline on Thursday following the start of futures trading. Prices for both metals plummeted: the cost of silver fell by more than 5,000 rupees, reaching a level of 2.03 lakh rupees per kilogram, while the futures gold rate dropped to 1.44 lakh rupees per 10 grams.

The drop in silver prices accelerated on Thursday, although a decrease had been observed over the past four days. On MCX, the price of silver with a December 4 expiry fell to 2,03,798 rupees, compared to closing at 2,09,168 rupees on the previous trading day. Thus, silver lost 5,370 rupees per kilogram in a single move.

Comparing current prices to the historical high, silver on MCX had previously exceeded the 4 lakh rupee mark for the first time at the end of January, peaking at 4,20,048 rupees. Based on current prices, silver is now available 2,16,250 rupees cheaper than its maximum value.

Not only silver, but also futures prices for gold sharply decreased. On MCX, 24-carat gold with a December 4 expiry fell to 1,44,311 rupees from an opening price on Thursday. Previously, on Wednesday, it traded at 1,46,079 rupees per 10 grams, representing a decrease of 1,768 rupees per 10 grams.

The decline in gold prices has continued since the beginning of this week. On Friday, the last trading day of last week, the futures price of gold was 1,47,918 rupees per 10 grams. As of the writing of this news on Thursday, the gold rate had fallen by 3,607 rupees. Furthermore, compared to September 30, when 10 grams of gold cost 1,49,036 rupees, it is now cheaper by 4,725 rupees per 10 grams.

Gold prices drop ahead of Dhanteras and Diwali festivals; rates for 18, 22, and 24 karat presented.
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Gold prices drop ahead of Dhanteras and Diwali festivals; rates for 18, 22, and 24 karat presented.

For those preparing to purchase gold for the Dhanteras and Diwali festivals, there is good news: gold prices have decreased before the start of the festivals. In India, demand for buying gold jewelry usually increases during this period, so the softening of prices may bring some relief to buyers.

However, the future movement of gold prices will depend on many global factors. Factors such as crude oil prices, tensions in the Middle East, and signals from the US Federal Reserve regarding interest rates can determine the trajectory of gold's movement.

On the Multi Commodity Exchange (MCX), the price of 24-karat gold fell by 0.42% on October 20, reaching ₹1,47,300 for 10 grams. In the retail market in Delhi on October 20, the price of 22-karat gold was ₹13,505 per gram, and for 18-karat gold—₹11,052 per gram.

In the international market, the spot gold price dropped by 0.3%, reaching $4,128.92 per ounce. The American gold futures contract with December delivery also fell by 0.3%, amounting to $4,148.50 per ounce.

It is important to note that the mentioned prices reflect values during trading. The price buyers receive in stores may differ. On the domestic market, gold prices are also dependent on import duties, the dollar-to-rupee exchange rate, local demand, taxes, and jewelry manufacturing costs.

The main reason cited for the weakening of gold prices is the rise in crude oil prices. According to a report by the news agency Reuters, concerns about oil supplies intensified due to the escalation of the situation in the Middle East. The price of Brent Crude remains at a level higher than in the last five months.

It is reported that Yemen rebels supported by Iran announced attacks on Saudi Arabia's energy facilities, airports, and military bases on Monday.

Gold is considered an alternative asset for investment during periods of inflation and uncertainty; however, it does not generate regular income, unlike some investment instruments such as government bonds, which pay interest. Therefore, when an increase in interest rates is expected, income-generating instruments may become more attractive to investors, putting pressure on gold prices.

Investors are also closely monitoring the US Federal Reserve meeting scheduled for October 27-28. The Fed's stance on interest rates may determine the further volatility of gold prices. If the Fed's stance is less hawkish than expected, gold may gain support. However, if signs emerge that interest rates will remain high for a long time, this could increase pressure on prices.

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