Gold and silver prices fell sharply on the Multi Commodity Exchange (MCX) on Thursday after the US Federal Reserve raised its benchmark interest rate by 25 basis points.
Silver prices dropped Rs 4,565 to Rs 2,30,221 per kg, compared with the previous close of Rs 2,34,786. Meanwhile, 24-carat gold fell Rs 1,987 to Rs 1,50,483 per 10 grams.
Why did gold and silver prices fall?
1. US Fed raises interest rates
The biggest factor behind the decline was the US Federal Reserve’s decision to raise interest rates by 25 basis points to 3.75%-4%. It was the Fed’s first rate hike since 2023. Higher interest rates generally reduce the appeal of non-yielding assets such as gold and silver.
2. Stronger US dollar
The Fed’s decision supported the US dollar, putting additional pressure on bullion prices. Gold and silver are traded internationally in dollars, so a stronger dollar can make them relatively more expensive for buyers using other currencies.
3. More rate hikes may follow
The Fed has indicated that further tightening could be considered depending on inflation and economic data. This has increased caution among investors and added pressure to precious metals.
4. Investors booked profits
Gold and silver had recorded strong gains over the past year. The latest fall has also been linked to profit-booking as investors reassessed their positions following the Fed’s decision.
5. Global economic and geopolitical factors
Oil prices remain elevated amid tensions in West Asia, while inflation concerns continue to influence global markets. These factors are contributing to volatility across commodities, including precious metals.
Despite Thursday’s sharp fall, gold prices later recovered some of their losses in international markets as investors reassessed the impact of the Fed’s decision.