Gold prices drop sharply as oil prices rise and US markets see heavy selling

Gold prices fell sharply this week as rising crude oil prices, a stronger US dollar and high US Treasury yields pressured bullion. MCX gold futures dropped around 3.50% over the week, with heavy selling pulling prices down from past highs. In Chennai, retail prices for 24K gold dropped 3.85% to reach ₹1,42,480 per 10 grams, while 22K jewellery gold fell to ₹13,060 per gram. On Friday alone, MCX futures dropped 0.92% to settle near ₹1,41,994 per 10 grams, and retail prices in Chennai fell 1.32%. Globally, bullion fell to a three-month low on Friday and faced its steepest weekly decline in over four months, dropping around 4% for the week and bringing the $4,000-an-ounce mark into focus ahead of the US Federal Reserve meeting on October 27-28. Rising energy prices acted as a major headwind for bullion, with Brent crude hitting a five-month high after Houthi attacks in Saudi Arabia raised concerns over energy supply disruptions. Stronger-than-expected US consumer and producer inflation data also strengthened expectations of tighter monetary policy. Saish Sawant, a research analyst at Emkay Global Financial Services, said gold's decline was amplified by investors selling liquid assets to meet margin calls after a sharp correction in US equities. Sawant noted that gold had fallen about 20% from its level at the start of the US-Iran conflict in late February. Renisha Chainani, chief research officer at Augmont, stated that a sustained move below the $4,000 threshold could push prices down towards $3,950, which is about ₹1,40,000. Over the medium term, Chainani expects gold and silver to try and form a base, with a potential rebound of 10 to 15% over the coming weeks if prices can stay above $4,200 an ounce. Meanwhile, Kaushlendra Sinha, CEO of IAGES, noted that jewellery demand should stay resilient during the festive season as buyers view softer prices as a buying opportunity and look for lightweight jewellery and old-gold exchange programmes.

Context

Gold is traditionally seen as a safe place to put money during times of global uncertainty, but its price moves up and down based on global factors like the strength of the US dollar, oil prices, and central bank interest rates. When energy prices go up, inflation often follows, which can lead central banks to keep interest rates higher for longer and put pressure on precious metals.