Gold Drops Rs 3,422, Silver Tumbles Over Rs 13,000 Amid Rising Oil Prices And Rate Hike Fears

New Delhi: Gold and silver took a sharp hit on Monday. Gold fell by Rs 3,422 per 10 grams. Silver dropped by more than Rs 13,000. The slide has caught the attention of buyers and investors alike. The Indian Bullion and Jewellers Association released the official rates for the day confirming the steep fall.

Today's Gold Rates

The Indian Bullion and Jewellers Association has released Monday's official rates.

Silver Rate Today

Silver is now at Rs 2,41,160 per kg. It was at Rs 2,54,160 on Saturday. The fall of over Rs 13,000 in just two days has surprised many in the market.

Why are gold and silver falling?

Gold and silver have been bleeding for weeks now. This is not a sudden one-day correction. The fall has been slow, continuous and stubborn. Every time the market looks like it will recover, another wave of selling pulls it back down. The major reason is crude oil. Oil prices have been rising without pause. When oil gets expensive, transport costs go up, manufacturing becomes costlier, food prices climb and inflation spreads across the entire economy. Central banks, including the US Federal Reserve and RBI, are now under serious pressure to raise the repo rate to bring inflation under control. When repo rates go up, bank fixed deposits and government bonds start offering much better returns. Gold pays no interest, no dividend, nothing. Investors sitting on gold start asking why they should hold a metal that gives no income when bonds and deposits are now offering solid returns. Money moves out of gold quietly but consistently. That steady outflow is what has been dragging prices down week after week.

What are the another factors?

The second layer of pressure is profit booking. Gold had a spectacular rally over the past couple of years and touched record highs. Large institutional investors, hedge funds and gold ETFs that loaded up at much lower prices are now systematically selling and cashing out. This kind of selling does not happen in one day. It happens gradually over weeks and months, which is exactly the pattern the market has been seeing. Every small recovery gets sold into. Silver is taking an even bigger beating because apart from being an investment metal, it has heavy industrial use in solar panels, electric vehicles and electronics. Fears of an economic slowdown are shrinking that industrial demand at the same time as investors are dumping it. A strong US dollar is making things worse because gold priced in dollars becomes automatically more expensive for buyers in India and other countries, killing demand further. Until oil cools down, until central banks signal that rate hikes are over, and until the big players finish their profit booking, this slide in gold and silver has room to continue.

Should you buy now?

Prices are lower than last week. Import duty remains high. Global markets are still uncertain.
If you have a purchase planned, this dip could be a good window. But keep watching the market and take consultation with your financial advisor before making a final decision.