Gold and silver prices in India witnessed a sharp decline on Wednesday, 18th October 2023, amid weak global cues and lackluster domestic buying. According to the GoodReturns website, the price of 24-carat gold declined by Rs 160 to Rs 59,950 per 10 grams, while the price of silver tumbled by Rs 500 to Rs 73,600 per kilogram. The price of 22-carat gold also fell by Rs 150 to Rs 54,950 per 10 grams.
The decline in gold and silver prices was in line with the trend in the international markets, where both the precious metals suffered heavy losses due to a stronger US dollar and rising bond yields. Spot gold dropped by $124 to $1,532.72 per ounce, while spot silver plunged by 9.7% to $26.07 per ounce. The US dollar index rose to a three-month high of 94.74, making gold more expensive for holders of other currencies. The US Treasury yields also surged to a four-month high of 1.64%, reducing the appeal of non-yielding assets like gold.
The fall in gold and silver prices was also influenced by the geopolitical tensions in the Middle East, where a deadly blast in Gaza killed at least seven people and injured dozens more. The blast was reportedly caused by an Israeli airstrike that targeted a Hamas militant site. The incident escalated the conflict between Israel and Palestine, raising fears of a wider regional war. Gold is usually considered a safe-haven asset in times of uncertainty and crisis, but investors seemed to prefer the US dollar as a refuge amid the turmoil.
The domestic demand for gold and silver also remained subdued in India, as buyers stayed away from the market due to high prices and the festive season. According to HDFC Securities senior analyst Saumil Gandhi, gold prices in India are still trading at a premium of Rs 3,000 per 10 grams over the international spot prices, making it unaffordable for many consumers. The festive season, which usually boosts the demand for gold and silver, also failed to attract buyers this year due to the COVID-19 pandemic and social distancing norms. The demand for gold and silver jewelry, coins, and bars was low across the country, as people preferred to save money or invest in other assets.
The outlook for gold and silver prices remains uncertain in the near term, as several factors could influence their movement. The US Federal Reserve’s monetary policy decision, due later this month, could have a significant impact on the US dollar and bond yields, which in turn could affect the prices of gold and silver. The Fed is expected to announce a tapering of its bond-buying program, which could put pressure on gold and silver prices. However, if the Fed signals a delay or a slower pace of tapering, it could support gold and silver prices.
The developments in the Middle East could also have a bearing on the prices of gold and silver, as any escalation or de-escalation of the conflict could alter the risk sentiment among investors. The demand for gold and silver in India could also pick up in the coming weeks, as the wedding season approaches and some buyers may take advantage of the lower prices. However, the COVID-19 situation and the possibility of a third wave could pose a challenge to the recovery of demand.
In conclusion, gold and silver prices in India declined sharply on Wednesday, following the trend in the global markets. The stronger US dollar, rising bond yields, geopolitical tensions, and weak domestic demand were some of the factors behind the decline. The outlook for gold and silver prices remains uncertain in the near term, as several factors could influence their movement.
This post Gold Loses Rs 160, Silver Tumbles by Rs 500 per kg in India: What’s Behind the Decline? was originally published at Finance Crave
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