Kolkata: The demand for gold peaks in India surges during the festive season. Purchasing gold during Dhanteras and Diwali is considered auspicious by millions
of Indians. Gold prices are currently seeing a decline during this festive period. Analysts suggest that gold and silver may face new challenges this week. Concerns regarding inflation have resurfaced due to rising crude oil prices. Furthermore, policy decisions from the US Federal Reserve could determine whether the prices of precious metals will stabilize or decline further.
Impact of bond yields
Precious metals are already under pressure due to rising bond yields and a strengthening dollar. All eyes are now on the Federal Reserve meeting scheduled for October 27–28 and the statements from its Chair, which may provide clues as to whether interest rates will remain high for an extended period.
West Asia conflict is significant
Attention will be focused on policy decisions from the European Central Bank and the Bank of Japan. Other key data points to watch include US durable goods orders, consumer confidence, inflation as measured by Personal Consumption Expenditures (PCE), and third-quarter GDP figures.
He further noted that inflation data from the Eurozone, developments surrounding the US midterm elections, Russia-Ukraine peace talks, and the ongoing conflict in West Asia will also be significant factors.
How long will prices be under pressure?
“One needs to remain cautious in the near term. Gold may continue to face pressure until there is greater clarity regarding the Federal Reserve’s policy stance. The upcoming decision will determine whether prices stabilize around current levels or decline further,” said Jatin Trivedi, vice-president of Commodity and Currency Research at LKP Securities.
Gold prices on MCX
This pressure was also clearly evident in domestic markets. On the Multi Commodity Exchange (MCX), the futures price for gold (for December delivery) fell by Rs 5,768 (approximately 4%) last week, closing at Rs 1.42 lakh per 10 grams. Silver saw an even sharper decline, falling below the Rs 2 lakh mark—a drop of Rs 15,087 (7.14%)—to settle at Rs 1.96 lakh per kilogram.
Trivedi added, “The downward trend in gold prices has continued this week.” Gold remained under pressure due to persistently high bond yields; on the MCX, it fell by more than 3% and was trading at around Rs 1,42,800 per 10 grams.
Selling pressure
According to Trivedi the rise in US Treasury yields and a strengthening dollar thwarted attempts by precious metals to recover, leaving them vulnerable to continued selling pressure. In international markets, COMEX gold futures for December delivery fell by $173.2—or 4.14%—last week, closing at $4,007.9 per ounce.
On Friday, the price of gold briefly dipped to $3,989 per ounce, though it later recovered to move back above the $4,000 level. Silver futures fell by $3.35—or nearly 6%—to close at $53.95 per ounce.
“The downward trend in gold futures persisted. Globally, the price of gold fell below $4,000 per ounce, recording a 4% decline by the end of the week,” said Pranav Mer, senior vice president of the Commodity and Currency Research department (EBG) at JM Financial Services. According to him, the drop in silver reflects the weakness seen in both industrial metals and gold.
Brent crude price
Brent crude closed above $117 per barrel. This has raised concerns that, due to persistent inflation, central banks worldwide might maintain a tighter monetary policy or even raise interest rates further.
Focus on the US Fed
Sustained decline in prices also highlights how sensitive investors have become to shifting expectations regarding interest rates. Consequently, the policy announcement from the Fed (the US central bank) in the coming week, along with comments from its Chair, will play a crucial role in determining the movement of bullion prices. If the Fed maintains a hawkish stance—meaning there is little room for interest rate cuts.
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