SRINAGAR: Gold and silver prices in India opened sharply lower on Wednesday, tracking a steep decline in global precious metal markets amid rising concerns that persistent inflation could prompt further interest rate hikes by the US Federal Reserve.
On the Multi Commodity Exchange (MCX), gold futures for August delivery fell by Rs 2,517, or 1.65 per cent, to open at Rs 1,49,926 per 10 grams, compared with the previous close of Rs 1,52,443. Silver futures for July delivery dropped by Rs 4,519, or 1.89 per cent, to Rs 2,34,009 per kilogram from the previous close of Rs 2,38,528.
The decline followed a sharp sell-off in international markets, where gold prices slumped to their lowest level in 11 weeks. Spot gold fell 1.8 per cent to $4,187.59 per ounce, its weakest level since March 23, while US gold futures for August delivery declined 1.7 per cent to $4,213.40 per ounce. Spot silver also fell 1.5 per cent to $64.43 per ounce.
Market analysts attributed the fall in bullion prices to a stronger US dollar and a surge in crude oil prices following renewed hostilities between the United States and Iran. The developments have heightened concerns over inflationary pressures and strengthened expectations that central banks may keep interest rates elevated for a longer period.
A stronger dollar makes gold and silver more expensive for holders of other currencies, reducing demand for the precious metals. At the same time, rising oil prices have fuelled fears of higher inflation, increasing the likelihood of tighter monetary policy.
According to the CME FedWatch tool, traders are currently pricing in a more than 70 per cent probability of a Federal Reserve interest rate hike by December.
Although gold is traditionally regarded as a hedge against inflation and economic uncertainty, higher interest rates tend to diminish the appeal of the non-yielding asset by increasing the attractiveness of interest-bearing investments.
Investors are now awaiting key US inflation data, including the Consumer Price Index (CPI) report due later on Wednesday and the Producer Price Index (PPI) figures scheduled for release on Thursday, for further clues on the Federal Reserve’s policy trajectory.
