Gold prices dropped by Rs 1,100 per 10 grams in the domestic market on Monday, while silver extended its slide as a surge in crude oil prices stoked fears of inflation. The decline mirrored a sharp fall in international markets, where spot gold fell nearly 1 per cent to $4,291.79 per ounce, and silver declined 1.34 per cent to $66.93 per ounce.
Domestic Market Reaction
In India, gold futures on the Multi Commodity Exchange (MCX) for August delivery were trading lower by Rs 1,100, or 0.8 per cent, at Rs 1,36,500 per 10 grams. Silver futures for July delivery fell by Rs 1,200, or 0.9 per cent, to Rs 1,32,000 per kg. The decline was driven by a rally in oil prices, which surged over 2 per cent amid supply concerns and robust demand, raising the spectre of higher inflation globally.
Inflation Fears Weigh on Bullion
Analysts said that rising oil prices could lead to higher input costs and consumer prices, prompting central banks to maintain a hawkish stance on interest rates. This would increase the opportunity cost of holding non-yielding assets like gold and silver. The US dollar index also edged higher, adding pressure on dollar-denominated commodities.
Market participants are now awaiting key US inflation data due later this week for further cues on the Federal Reserve's monetary policy path. A higher-than-expected reading could trigger further selling in precious metals.
Global Cues
On the international front, spot gold slipped to $4,291.79 per ounce, down from its previous close, while silver dropped to $66.93 per ounce. The decline was broad-based, with platinum and palladium also trading lower. Investors shifted towards safe-haven assets like the US dollar and bonds amid the inflation uncertainty.
Oil prices extended gains, with Brent crude futures rising above $75 per barrel, stoking fears that central banks may need to keep interest rates elevated to curb inflation. This negative sentiment spilled over into the bullion market, which is traditionally seen as a hedge against inflation but faces headwinds from higher rates.
Outlook
Analysts expect gold and silver to remain under pressure in the near term, with the focus on inflation data and central bank commentary. However, any escalation in geopolitical tensions or a sharp correction in equity markets could provide support to safe-haven buying. The domestic market will also track the rupee movement, as a weaker rupee makes imports costlier and supports local prices.
