In the global market, gold futures on COMEX were trading at around $4,030 per ounce, while silver was trading at approximately $54 per ounce. On the domestic Multi Commodity Exchange (MCX), gold futures were trading at around ₹1,42,300 per 10 grams, while silver futures stood at approximately ₹1,96,000 per kilogram.
According to Bloomberg, citing Ryan McKay, senior commodity strategist at TD Securities, concerns about oil prices, interest rates and the Federal Reserve's stance are weighing on gold. He also said investment flows in the market had been negative.
Bloomberg reported that precious metal prices were heading towards a 4% weekly decline, which would be their biggest weekly fall since early June. According to McKay, gold is currently facing broad-based selling by investors seeking to reduce risk.
He explained that renewed tensions in the Middle East had pushed energy prices higher again, while investors were moving towards US bonds as money flowed out of stocks linked to artificial intelligence companies. This had increased yields on US Treasury bonds, putting further pressure on gold. Rising bond yields generally weaken gold prices because the metal does not generate regular interest income.
However, one segment of the market has continued to show strength despite the weakness in gold prices: holdings in gold exchange-traded funds (ETFs).
Gold ETFs tracked by Bloomberg have recorded inflows for 14 consecutive weeks, a trend that runs counter to the decline in gold prices. Ole Hansen, head of commodity strategy at Saxo Bank A/S, wrote in a note that long-term investors were continuing to accumulate gold through ETFs to protect themselves against geopolitical risks and the declining purchasing power of currencies.
Silver prices had fallen 7.5% by Friday. From their August peak of ₹2,48,800 per kilogram, silver prices have dropped by ₹56,000. Compared with their record high of ₹4,20,048 per kilogram, silver prices have fallen by more than half.
The sharp correction follows a 170% surge in silver prices in 2025. Gold has also registered a substantial decline. From its August peak of ₹1,64,773 per 10 grams, gold has become cheaper by around ₹23,000.
Rising oil prices have kept inflation concerns elevated and intensified expectations that interest rates could increase. Naeem Aslam, chief investment officer at Zaye Capital Markets, said in a note that the recent weakness in precious metals was driven by rising US Treasury yields, a stronger dollar and renewed inflation concerns as Brent crude prices climbed above $110 per barrel.
Higher bond yields and a stronger US dollar have continued to weigh on gold prices. These factors reduce the appeal of holding precious metals because they do not provide regular interest income.
Despite the decline, gold has delivered strong returns compared with the previous year, according to Kumar Jain, secretary of the India Bullion and Jewellers Association. He said this had helped sustain investor confidence.
Speaking to news agency ANI, Jain said the festive season was underway, with Dhanteras and Diwali approaching, prompting people to buy gold in substantial quantities. He also noted that gold recycling had become more common.
According to Jain, gold was priced at ₹1,16,000 per 10 grams during Dussehra last year, compared with ₹1,49,000 per 10 grams during Dussehra this year. He said the increase in prices had strengthened investor confidence.
He added that the wedding season was also approaching, with people buying gold to have jewellery made. This was one of the major factors supporting demand. However, Jain said people had experienced considerable disappointment with silver.
Central bank purchases and strong demand for gold ETFs have also helped limit the decline in gold prices.
Linh Tran, a market analyst at XS.com, said in a note that the market was trying to balance demand for gold purchases against the pressure from higher interest rates. She said selling pressure had eased somewhat, but current buying demand was not strong enough to give prices a new direction.
Aslam said silver's important role in industrial applications meant that weakness in manufacturing activity could also affect its prices, creating additional downward pressure.
Zaye Capital expects the direction of silver prices to depend on whether a recovery in industrial demand and continued constraints on physical silver supply can outweigh the pressure created by a restrictive US monetary policy.
Fawad Razaqzada, a market analyst at Forex.com, said inflation had a dual impact on gold. In theory, persistent price increases should boost demand for gold as a store of value. However, if inflation remains elevated for long enough to force central banks to maintain a restrictive monetary stance, real and nominal interest rates could rise, reducing gold's appeal.
Oil prices affect gold and silver primarily through indirect channels, including inflation, interest rates and economic growth. There is no fixed rule that rising oil prices will automatically cause precious metal prices to fall.
When oil becomes more expensive, fuel, transportation and production costs rise. This raises concerns that inflation could remain elevated for an extended period.
Investors may then expect central banks to cut interest rates less aggressively or keep them elevated for longer. In such circumstances, bond yields can rise, making gold less attractive because it does not pay interest.
There is also another possible outcome. A sharp increase in oil prices can intensify concerns about inflation and geopolitical tensions, prompting investors to turn to gold as a safe-haven asset. If pressure to raise interest rates remains limited, gold prices could strengthen instead.
Silver faces an additional risk because it is both a precious metal and an industrial raw material. It is used in electronics, solar panels and other manufacturing sectors. In 2024, industrial applications accounted for approximately 56% of total global silver demand.
If a surge in oil prices raises production costs and weakens manufacturing activity, silver could face the additional risk of declining industrial demand. When markets anticipate both restrictive monetary policy and slower economic growth, silver prices can come under greater pressure than gold.
However, this remains a potential demand-related risk rather than a certainty.
Oil prices do not directly determine precious metal prices. The crucial factors are how rising oil prices affect interest rate expectations, bond yields after accounting for inflation, and industrial activity in the case of silver. These forces will remain central to determining whether gold and silver can stabilise after their sharp declines.
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