Gold and silver prices extended their decline on the Multi Commodity Exchange (MCX) on Wednesday, with both metals coming under intense selling pressure. The fall has been driven by a combination of global factors, including a stronger US dollar, rising bond yields, higher crude oil prices and growing expectations that interest-rate cuts could be delayed.
The two precious metals have lost more than 6% each over the past week, adding to concerns among investors about the outlook for bullion prices.
Gold, silver tumble on MCX
Gold futures opened sharply lower during Wednesday’s trading session. The October gold contract, which had closed at 151729.00 in the previous session, opened at 150033.00 and slipped to an intraday low of 149665.00. The contract was down by more than Rs 2,000.
Silver witnessed an even sharper decline. The December silver contract had settled at 235441.00 previously but opened at 232536.00 before falling further to 231914.00. The metal recorded a decline of more than Rs 3,500.
What is driving the fall?
Stronger dollar and higher bond yields: The US dollar index has moved above 99, while the yield on 10-year US Treasury bonds has risen beyond 4.80%. As gold and silver do not generate interest income, higher bond yields can make them less appealing compared with interest-bearing investments.
Crude oil surge: WTI crude oil prices have crossed $96 a barrel amid escalating tensions in West Asia. The rise in oil prices has fuelled concerns about higher inflation, which could influence monetary policy decisions globally.
Rate cuts may take longer: Persistent inflationary pressure has strengthened expectations that the US Federal Reserve and other central banks may delay interest-rate cuts. The possibility of rates staying elevated for longer has added to selling pressure in precious metals.
Dollar strength offsets safe-haven demand: Geopolitical tensions generally boost demand for gold as a safe-haven asset. However, the impact of the stronger dollar and rising bond yields has been stronger in the current market, limiting the support that bullion would normally receive from safe-haven buying.
With these factors weighing simultaneously, gold and silver have faced sustained pressure in the futures market, resulting in a sharp decline over the past week.