Gold Prices Drop ₹3,500 in 2 Days, Silver Slides ₹8,700/kg as Crude Oil Crosses $100

Gold prices had a sharp fall in the domestic bullion market and fell nearly ₹3,500 per 10 grams in the last two trading sessions. Silver fell almost ₹8,700 per kg as investors got affected by rising crude oil prices and changing expectations in global financial markets.

The decline happened even as the global marker crude oil prices reached above $100 per barrel and inflation and global economic uncertainty increased. Gold should be a safe haven asset in times of geopolitical tension but profit booking and a stronger US dollar have weighed on precious metal prices.

Traders locked in profits after gold rallied to record highs earlier this year, market experts said. The rise in crude oil prices has also sparked expectations that central banks may hold interest rates up longer to lower inflation and make it more difficult to keep gold and other non-yielding assets attractive as they are not so attractive assets.

Silver, which is driven by both investment demand and industrial consumption, suffered even more. The fall was attributed to global economic fears, profit taking, and even weakness in global commodity markets. Despite the decline, silver will still attract long-term investors because of its growing use in solar panels, electric vehicles and electronics manufacturing.

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For Indian consumers, this recent decline in bullion prices could bring a good deal of relief ahead of the festive and wedding season. Lower prices can drive jewellery sales because in festivals as well as in ceremonies of marriage the market is usually more active. Jewellers would welcome more footfall if prices remained at current levels or went down further.

But the volatility is expected to stay high in the coming weeks. Global factors in the prices of gold and silver will determine the movement of gold and silver and the prices of the US dollar will depend on crude oil prices, US inflation data, interest rate expectations, geopolitical developments and so on.

The rise in crude oil prices has given commodity markets mixed outlooks. Higher oil prices usually increase inflationary pressures worldwide, which could support gold as an inflation hedge. But expectations of tighter monetary policy will also put a hold on the price of precious metals by strengthening bond yields and the dollar.

Investment experts tell long-term investors not to panic over short-term price corrections. Instead they say, they should see market declines as a chance to accumulate gold gradually through systematic investments or sovereign gold bonds (or both) and do so depending on one's financial objectives.

With the global market still volatile and crude oil prices up above $100 per barrel, investors will be closely monitoring what will be happening in the near term and central banks will be working on the economic data and central bank decisions. These will be the key to defining the near-term direction of gold and silver prices and the long-term demand for gold will continue to be supported by the lack of confidence and uncertainty in the economy will keep prices up.