Gold price falls over Rs 3,100, silver crashes nearly Rs 19,000 — Why are precious metal prices falling today?

Gold and silver prices witnessed a sharp decline on Friday as a stronger US dollar, rising Treasury yields and growing concerns over persistent inflation pressured investor sentiment in the precious metals market.

The fall in bullion prices came amid expectations that the US Federal Reserve could keep interest rates higher for a longer period following elevated inflation readings and rising energy prices.

Gold and Silver Prices on MCX

On the Multi Commodity Exchange (MCX), Silver prices witnessed a sharp fall on Friday, with the metal declining by Rs 18,835 from its previous close of Rs 2,91,102 to touch an intraday low of Rs 2,72,267. This marks a decline of nearly 6.47 per cent during the session.

Gold prices also remained under pressure, falling Rs 3,127 from the previous close of Rs 1,61,978 to an intraday low of Rs 1,58,851, registering a decline of around 1.93 per cent.

International Gold Prices Extend Losses

In the international market, spot gold declined 0.6 per cent to USD 4,619.61 per ounce by 9:41 AM IST, extending losses for a fourth straight session and touching its lowest level since May 6. The metal has lost around 2 per cent so far this week.

US gold futures for June delivery also slipped 1.3 per cent to USD 4,624 per ounce. Spot silver fell 2.5 per cent to USD 81.41 per ounce, while platinum declined 1.7 per cent to USD 2,020.61 and palladium slipped 0.8 per cent to USD 1,425.50.

Stronger US Dollar Hurts Bullion Demand

Analysts said the strengthening US dollar has emerged as one of the key reasons behind the decline in gold and silver prices this week. The dollar index has gained more than 1 per cent during the week, making dollar-priced bullion more expensive for holders of other currencies and reducing overseas demand.

Rising Treasury Yields Add Pressure

At the same time, benchmark 10-year US Treasury yields climbed close to one-year highs, increasing the opportunity cost of holding non-yielding assets such as gold and silver.

Commodity experts said rising crude oil prices and persistent inflation concerns have further weakened hopes of near-term interest rate cuts by the US Federal Reserve.

Crude Oil Rally Raises Inflation Concerns

Brent crude oil prices surged 5.6 per cent this week and hovered above USD 108 per barrel as the ongoing Iran conflict continued to disrupt movement through the Strait of Hormuz, a key global oil supply route.

A series of inflation reports released this week raised fears that rising energy prices could spread into broader goods and services inflation, adding pressure on central banks to maintain tighter monetary policy.

What Motilal Oswal’s Manav Modi Said

Manav Modi, Commodities Analyst at Motilal Oswal Financial Services Ltd, said gold prices remained under pressure due to rising oil prices, a stronger dollar and elevated US bond yields.

“Gold prices edged lower as rising oil prices, a stronger dollar and US yields weighed on sentiment following reports of a vessel seizure and another ship sinking. Expectations for US interest rate cuts have largely diminished after sharp energy-driven increases in producer and consumer inflation,” Modi said.

He added that benchmark 10-year US Treasury yields, climbing close to one-year highs, increased the opportunity cost of holding non-yielding assets such as gold.

According to Modi, investors are also closely monitoring geopolitical developments, especially the meeting between US President Donald Trump and Chinese President Xi Jinping in Beijing.

“Markets remain focused on the Trump-Xi meeting, while concerns around the Iran conflict and the Taiwan issue continue to keep investors cautious,” he said.

India’s Import Duty Hike Impacts Sentiment

He further noted that India’s decision to raise import duties on gold and silver to nearly 15 per cent from around 6 per cent has also impacted market sentiment.

“Higher import duties and restrictions on gold imports are aimed at controlling the trade deficit and protecting forex reserves, but these measures may hurt jewellery demand in one of the world’s largest bullion-consuming nations,” Modi said.

Market experts said investor profit-booking after recent record highs in bullion prices also contributed to the sharp correction.

Gold prices have fallen nearly 13 per cent since the US-Iran conflict erupted on February 28, reflecting increased volatility in commodity markets amid geopolitical tensions and changing interest rate expectations.

Kotak Neo on Fed Rate Cut Expectations

Kotak Neo said bullion prices remained under pressure after strong US economic data and hawkish comments from Federal Reserve officials reduced hopes of rate cuts.

“Spot gold and silver prices settled lower as a stronger dollar and persistent US inflation dampened bullion demand. A record rally in the S&P 500 further reduced safe-haven buying interest,” Kotak Neo said in a note.

The brokerage noted that US retail sales rose 0.5 per cent month-on-month in April, while annual sales growth accelerated to 4.9 per cent, indicating resilient consumer demand despite higher fuel prices.

Initial jobless claims also increased slightly to 211,000, while comments from Kansas City Fed President Jeffrey Schmid and Cleveland Fed President Beth Hammack reinforced expectations that interest rates could stay elevated for longer.

“Gold weakened toward USD 4,610 and is heading for a weekly loss of nearly 2 per cent amid fading hopes of Fed rate cuts and firm inflation concerns,” Kotak Neo added.

Analysts said investors are now awaiting upcoming US manufacturing and industrial production data for further cues on inflation trends and the future interest rate path.

They added that the combination of a stronger dollar, elevated bond yields, rising crude oil prices, geopolitical tensions and reduced expectations of US rate cuts triggered broad-based selling in precious metals, leading to the sharp fall in gold and silver prices on Friday.