During the previous week, gold experienced a major decline, making it one of the largest losses in recent history. For the week, global gold prices fell approximately -1.8%. Now, this marks 3 consecutive weeks of declining prices for gold across the globe.
In fact, the data for the broader market supports this drop even further as there was a much larger movement of approximately -9.6% during the course of this week (the largest decline in years), but prices stabilised after this fall.
In India, the futures market reflected this trend, with prices of gold falling more than ₹3,600 per 10g in one day.
Silver experienced an even greater decline than gold over this same period. Globally, the price of silver was approximately -4.8% lower for the week.
On the Indian MCX, prices of silver also fell sharply this week by approximately -3.2% or ₹8,600 per kg, forming a continuing decline.
Some reports show an even larger short-term correction, with silver prices falling ₹19,000 per kg this week because of market volatility.
Why did prices decrease?
Despite increasing geopolitical tension (which usually causes prices to increase), other factors contributed to this decrease: A strong Dollar and rising bond yields made gold less appealing due to it being a non-yielding asset. Higher expected interest rates have reduced investor demand for this type of investment. The recording of profits from previously high prices by investors selling gold occurred – along with investors transferring these funds into other asset classes.
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Bigger Trend to Watch:
A recent dip in value this week is part of a broader correction of:
- A 13% decline in prices for gold from recent peaks
- More significant decline in silver (~double digits) over the last couple of weeks
Bottom Line
Gold and silver prices have dropped sharply in recent weeks due to global market conditions. Gold dropped approximately 1.8%, making it the third consecutive week of declines for the precious metal. Silver declined by a greater amount — 4% to 5%. In addition, Indian futures market prices for both precious metals will also see significant reductions from their current levels.
The primary reasons for the decline of both precious metals are the stronger U.S. dollar, increasing bond yields, and forecasts that interest rates will remain elevated for an extended period of time; all of these factors decrease the attractiveness of holding non-yielding investments such as precious metals. In addition, profit taking after the recent rise of both silver and gold prices contributed to some of the decline as well. Silver is historically much more volatile than gold; both precious metals will likely continue to face some challenges in the near future.
- Weekly declines for gold were ~1.8% (with sharp drops on an intraday basis)
- Weekly declines for silver range from ~4-5%, with larger drops on various days
These two metals are facing pressure due to macroeconomic factors and not because there is a lack of demand. In addition, volatility will continue in the near future.
