Domestic futures market witnessed a sharp decline in gold and silver prices. On the Multi Commodity Exchange, silver has slipped below the level of two lakh rupees. Now, the upcoming US Federal Reserve meeting will determine the future trajectory of the market. If you're planning to buy gold or silver, don't rush right now. Over the past week, bullion market prices for gold and silver crashed heavily, while experts state that this downward trend may continue through this week as well. In reality, rising crude oil prices have escalated inflation concerns, while global investors are closely watching the next steps of the US Federal Reserve to steer market direction.
Gold and silver prices plunge sharply on the MCX
The domestic futures market on the Multi Commodity Exchange experienced heavy selling pressure last week. December delivery gold closed with a major drop of five thousand seven hundred sixty-eight rupees, which is about four percent, settling at one lakh forty-two thousand rupees per ten grams. Silver witnessed an even steeper decline than gold. Last week, silver prices crashed by fifteen thousand eighty-seven rupees, representing a sharp drop of seven point one four percent. Following this steep fall, silver slipped below the psychological milestone of two lakh rupees to reach one lakh ninety-six thousand rupees per kilogram, while the international market presented a similar scenario. On Comex, December delivery gold fell by four point one four percent to close at four thousand seven point nine dollars per ounce. During Friday trading, prices even dipped to three thousand nine hundred eighty-nine dollars at one point, while meanwhile, global silver dropped by nearly six percent to fifty-three point nine five dollars per ounce.
Bullion market rattled by surging crude oil prices
Several global factors are driving this downward trend in gold and silver. Brent crude prices have surged past one hundred fifteen dollars per barrel, while the basic rule dictates that when crude oil becomes expensive, transportation and operational costs rise across all sectors, creating a severe threat of inflation. To keep inflation under control, central banks worldwide may maintain elevated interest rates for extended periods. When interest rates stay high, investors tend to pull money out of gold and silver to invest in bonds and the dollar. According to Jatin Trivedi, Research Analyst at LKP Securities, gold failed to find support even at lower levels due to the strengthening US dollar alongside rising bond yields. Pranav Mer from JM Financial Services explains that weakness in industrial metals spoiled the momentum for silver. On top of that, silver prices had reached very high levels, leading to a notable softening in market demand, which further intensified downward pressure on prices.
Path ahead to be determined by the October twenty-seven and twenty-eight meeting
The crucial question now is what lies ahead. All eyes are focused on the US Federal Reserve meeting scheduled for October twenty-seven and twenty-eight. Statements from the Fed Chair will clarify whether gold and silver prices will stabilize at current levels or if the downward trend will persist. This week, markets will monitor decisions not only from the US Fed but also from the European Central Bank and the Bank of Japan. Also, US inflation figures, third-quarter GDP numbers, and consumer confidence data will be released, while all these statistics will play a pivotal role in charting the market direction. If the Federal Reserve adopts a hawkish stance regarding interest rates, the dollar and bond yields will surge further, implying that gold and silver prices could fall even lower. Conversely, if the Fed maintains a dovish stance, precious metals might receive some relief from this correction.