Gold prices have recently fallen below Rs 1.42 lakh, providing potential relief for buyers planning to purchase during the festive and wedding season. As of Friday, October 30, at 11.45 am, the Multi Commodity Exchange (MCX) reported gold trading at Rs 1,41,979 per 10 grams, reflecting a decrease of 0.43 per cent. Silver prices have also experienced a notable decline, with MCX silver priced at Rs 1,85,900 per kg, down 1.88 per cent.

The recent downturn in prices may be attributed to several economic factors, including rising crude oil prices and renewed inflation concerns. These elements have raised questions about the future trajectory of gold and silver, leading to speculation on whether buyers should take advantage of the current dip or await further declines.

Market analysts suggest that the correction in precious metal prices may not be complete. The combination of geopolitical tensions and economic indicators has created an environment of uncertainty, impacting the attractiveness of gold and silver as investment options.

Factors Influencing Price Declines

Gold and silver have faced downward pressure primarily due to escalating crude oil prices, which have heightened fears of inflation. Recent data from the United States has shown an uptick in consumer prices, particularly in September, driven by increased gasoline and other goods prices. This has led to speculation that the US Federal Reserve may consider another interest rate hike in December to combat persistent inflation.

Higher interest rates typically diminish the appeal of gold, as it does not provide regular interest income. Consequently, investors may shift their focus to interest-bearing assets, thereby exerting additional pressure on gold prices. Furthermore, geopolitical developments, particularly concerns about potential military actions involving the US and Iran, have exacerbated the situation by pushing crude oil prices higher.

Dr Renisha Chainani, Chief Research Officer at Augmont, noted that the Federal Reserve has not ruled out the possibility of further rate hikes as it seeks to manage stubborn inflation. The recent rise in the US personal consumption expenditures price index has reinforced this perspective, with traders estimating a 75 per cent likelihood of a rate increase in December, according to CME’s FedWatch Tool.

Future Outlook for Gold and Silver

The short-term outlook for both gold and silver appears weak, with experts cautioning that prices may continue to decline before stabilising. Chainani indicated that gold has fallen below the critical support level of $4,000 (approximately Rs 1,42,000), which could lead to further declines towards $3,950 (around Rs 1,40,000) and $3,900 (around Rs 1,38,000) within the next 10 to 15 days.

Silver has also breached its support level of $52.5 (around Rs 1,92,000) and may trend towards $50 (around Rs 1,80,000). Despite the current bearish sentiment, Chainani expressed a more optimistic medium-term outlook, suggesting that both metals could establish strong support zones that may facilitate a rebound of 10 to 15 per cent in the coming weeks.

For a sustained upward trend, gold must maintain levels above $4,100, while silver should surpass $58, as indicated by Chainani’s analysis.

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