Business
oi-Swastika Sruti
On the eve of Karwa Chauth, October 29, silver prices witnessed a sharp downfall with the December futures contract on the Multi Commodity Exchange (MCX) slipping below the Rs 1.90 lakh per kg mark. Gold prices also declined, putting buyers in focus ahead of the festive and wedding season.
On October 29, silver futures on MCX fell sharply to Rs 1,89,637/kg and gold futures dropped to Rs 1,42,800/10gm, driven by US Federal Reserve policy uncertainty and investor profit-booking ahead of the festive season.
Silver futures for December delivery dropped by Rs 4,600 to Rs 1,89,637 per kg. Gold futures for December delivery fell by Rs 700 to Rs 1,42,800 per 10 grams on the MCX.
The fall came even as the US Federal Reserve kept its interest rates unchanged. However, uncertainty over the future direction of US interest rates, movements in the dollar and bond yields, and selling after the recent rally have put pressure on precious metal prices.
Gold And Silver Prices Fall On MCX
Silver prices witnessed a steeper fall of Rs 4,600/kg and fell below the Rs 1.90 lakh mark. Prices of gold too saw a dip, with the December futures contract dipping to Rs 1,42,800/10 gram.
On the global front, prices of gold witnessed a fall of 0.42% to $4,034.45/ounce. Prices of silver too witnessed a steeper fall of 2.47% to $52.355/ounce.
This is regarding the prices of futures and international market given above. Retail price of gold and silver jewellery may vary based on the city, purity, etc.
Why Did Gold And Silver Prices Fall?
1. Uncertainty Over US Federal Reserve Policy
The US Federal Reserve kept its interest rates unchanged in the range of 3.75% to 4%. However, two officials reportedly supported a 0.25 percentage-point rate increase.
This has raised questions about the possibility of further rate hikes in the coming months, including December. Interest rate expectations can influence gold and silver prices because these metals do not pay interest like bonds or savings instruments.
If investors expect interest rates to remain high or rise further, precious metals may face pressure as other interest-bearing assets become more attractive.
2. US Dollar And Bond Yields Remain Important
Investors are also watching US inflation data and signals about the future direction of interest rates.
A stronger US dollar can make gold and silver more expensive for buyers using other currencies, potentially reducing demand. Rising US bond yields can also make interest-bearing investments more attractive compared with precious metals.
Any fresh movement in the dollar or bond yields could therefore influence prices in the coming sessions.
3. Investors May Be Booking Profits
Gold and silver have witnessed significant price movements in recent months. After a strong rally, some investors may choose to sell their holdings and book profits.
Such selling can push prices down, particularly when a large number of investors try to exit positions at the same time. Silver can experience sharper price swings than gold, making its decline more pronounced during periods of heavy selling.
However, profit-booking alone cannot be confirmed as the complete reason for Thursday’s fall without further market evidence.
4. Silver Also Depends On Industrial Demand
Silver is used not only as an investment asset but also in industries such as electronics and solar energy. Its price is therefore influenced by both investment demand and expectations about industrial consumption.
Concerns about industrial demand or a broader decline in investors’ willingness to take risks can put additional pressure on silver. This is one reason why silver prices can sometimes move more sharply than gold.
Should You Buy Gold And Silver After The Price Fall?
This recent drop could catch the interest of those intending to buy jewels for weddings or other festivities. But the fall in prices does not necessarily mean that this is the bottom of the market.
Buyers need to assess their current needs and budget and the prospect of future fluctuations before taking any steps. Buyers of jewelry for special occasions could also opt for making purchases over a period of time and not all at once, according to their budget and requirements.
Investors could look out for inflation numbers in the US, signals from the Fed, dollar and world gold prices before investing.
