Gold falls 2.4%, silver 3.5% on MCX: What is driving the sell-off

Gold and silver prices fell sharply on the Multi Commodity Exchange (MCX) on Monday, September 28, as higher US Treasury yields, a stronger dollar and elevated crude oil prices weighed on precious metals.

MCX October gold was trading at ₹1.47 lakh per 10 grams, down 2.42%, while December silver was at ₹2.26 lakh per kg, lower by 3.46%.

The decline comes against a backdrop of rising concerns over inflation and expectations that the US Federal Reserve could maintain a tighter monetary stance. Higher interest rates and bond yields tend to weigh on non-yielding assets such as gold.

Why are gold prices falling?

According to Nirpendra Yadav, Senior Research Analyst at Bonanza, gold's break below $4,200 an ounce reflects a shift in the near-term macro environment. Higher oil prices are adding to inflation concerns, pushing US Treasury yields and the dollar higher and strengthening expectations that the Fed may need to keep monetary policy tight.

Yadav said investors should track the US dollar, Treasury yields, oil prices and upcoming US inflation and employment data, as these could influence expectations around the Fed's next moves.

The geopolitical situation is adding another layer to the market.

Vedika Narvekar, Research Analyst – Commodities & Currencies at Anand Rathi Share and Stock Brokers, said the continuing uncertainty around the Strait of Hormuz is keeping oil prices elevated and inflation concerns alive.

She noted that the US 10-year Treasury yield had risen to around 5.20%, creating a difficult backdrop for gold. Narvekar said gold could remain vulnerable unless there is greater clarity on the Iran situation or yields cool off.

What levels should gold investors watch?

On the global market, Narvekar identified $4,110 an ounce as the next crucial support, while strong resistance is seen around $4,300 an ounce.

For domestic investors, she pegged the next important support for MCX gold at around ₹1.45 lakh per 10 grams.

Yadav said the $4,100-$4,070 an ounce zone is an important area to watch. He also identified around $3,980 an ounce as a significant support level, below which selling pressure could intensify.

Ashish Rajodiya, Head – Commodities at PL Capital, put MCX gold support at ₹1.48 lakh and ₹1.46 lakh per 10 grams, with resistance at ₹1.52 lakh and ₹1.55 lakh per 10 grams.

What about silver?

Silver is also under pressure, with the MCX December contract down 3.46% to ₹2.26 lakh per kg. Globally, silver was trading around $62.63 an ounce, according to Gaurav Garg, Head Research at Lemonn, who said higher US yields and a firm dollar were weighing on both precious metals.

However, Vikram Subburaj, CEO of Giottus, noted that silver had shown some early recovery in the session, highlighting its higher volatility compared with gold. He cautioned investors against reading too much into a single trading session.

What should investors watch now?

The immediate triggers for bullion are likely to remain US inflation and jobs data, Treasury yields, the dollar, oil prices and developments around the US-Iran situation.

For Indian investors, the rupee also matters. Subburaj noted that a weaker rupee can cushion the impact of a fall in international gold prices, while simultaneously keeping domestic bullion prices relatively expensive.

From the physical market perspective, Darshan Desai, CEO of Aspect Bullion & Refinery, said jewellers and traders are likely to remain cautious about inventory amid the volatility. He added that a meaningful correction could bring some buyers back, while the upcoming festive and wedding season could support domestic demand.

For investors, Subburaj advised against chasing short-term moves and said long-term buyers could consider staggered purchases, while traders using leverage should keep positions smaller and use strict stop-losses.