Gold, Silver Prices Are Drop After Record Highs This Week
Gold and silver prices drop after hitting record highs this week. Investors book profits as markets await US inflation data and Federal Reserve signals.
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The prices of gold and silver dropped slightly on Wednesday after the prices had increased tremendously at the beginning of this month, as the investors took the profits before the release of the crucial US inflation data that is expected to be very influential for the Federal Reserve's next interest rate decision.
On the Multi Commodity Exchange (MCX), the prices of gold futures for December delivered were Rs 1,28,000 per 10 grams at 7:45 am, which is Rs 271 or 0.21% less than the closing price of Tuesday. The futures of silver dropped 0.22% and were traded at Rs 1,50,000 per kilogram, a fall of Rs 327.
The metals have been on the upswing for some weeks now, with gold hitting an unprecedented high of $4,381.21 per ounce on Monday, only to lose more than 5% afterward, thus commensurately bringing back its sharpest single-day fall since August 2020.
On the international market, the spot gold was quoted at $4,113.54 per ounce at 1:15 am GMT, whereas the US December gold futures for the following day saw a minor rise of 0.5% to $4,129.80. Spot silver decreased by 0.9% to $48.29 per ounce, platinum went down by 1.1% to $1,534.44, and palladium's price remained almost steady at $1,406.76.
The price of gold has almost doubled this year, thanks to central banks buying, geopolitical tensions, and the expectation of monetary easing by central banks in the major economies. The recent drop in prices indicates that the investors are now less interested in gold as the inflation data and central bank policy decisions are coming soon.
The market was also influenced by US President Donald Trump claiming a possible trade agreement with Chinese President Xi Jinping during their meeting in South Korea. Such comments lessened global trade worries and consequently made gold less attractive as a safe-haven asset. US Inflation and Rate Decisions
Investors are eagerly waiting for the US Consumer Price Index (CPI) for September, which was delayed because of the US government shutdown. Analysts anticipate the statistics to reveal the direction of inflation and subsequently the Fed's interest rates.
A Reuters poll shows that the Fed could cut the benchmark policy rate by 25 basis points next week, with another possible reduction in December. Economists, however, are split over the long-term path. The European Central Bank (ECB), which is also meeting next week, is widely expected to keep the rates unchanged. Generally, lower interest rates are bullish for gold since they lower the opportunity cost of owning non-yielding assets.
In India, the demand for gold is very much alive due to the festive season. Silver also had a similar cooling period after a strong rally. Analysts predict that the volatility will remain, given silver's double role as a precious and commodity metal that is needed in the electronics and solar panel industries.
Nonetheless, experts assert that the medium-term gold and silver price outlook by and large is positive owing to global uncertainties, central bank purchases, and a weakening dollar. Short-term corrections will happen as traders will be taking profits after the last highs. The price levels might remain the same for a short period due to the increased physical demand during festivals like Dhanteras and Diwali in India. On the other hand, there can be a decline in demand after the festivals if the inflation numbers indicate that the rate cuts will be slower or if the global risk appetite becomes better.
Analysts say that the gold market is still very much alive even though there has been a halt in the record rally since the geopolitical and economic uncertainties continue to affect the global market.