Gold and silver prices plummet: What's behind the sudden crash?

Mumbai (The Uttam Hindu): Prices of precious metals i.e. gold and silver declined on Monday due to strengthening of US dollar and inflation fears, which reduced the expectations of interest rate cut by the US Federal Reserve in the near future.

Given the rising tensions between the US, Israel, and Iran, prices of precious metals like gold and silver were expected to rise further. However, instead, their prices have seen a decline.

On Monday, during the day's trading, gold futures for April delivery on MCX fell to a day's low of Rs 1,59,826 per 10 grams, while silver futures for May delivery fell to a day's low of Rs 2,60,743 per kg.

At the time of writing (around 12:18 p.m.), the gold contract with an April 2 expiry on MCX was trading down by Rs 881, or 0.55 percent, at Rs 1,60,678 per 10 grams. Meanwhile, the silver contract with an May 5 expiry on MCX was trading down by Rs 3,378, or 1.26 percent, at Rs 2,64,907 per kilogram.

Meanwhile, the US dollar strengthened to a three-month high of 99.34, representing an intraday gain of about 0.36 percent. A stronger dollar makes buying gold and silver more expensive for investors in other currencies.

U.S. Treasury bond yields have also risen, with the 10-year bond yield hitting a one-month high, according to analysts. This increases the cost of holding non-interest-bearing metals like gold and silver.

Meanwhile, crude oil prices have also surged, rising nearly 27 percent to reach $116 per barrel, marking the first time since 2022 that both major oil benchmarks have surpassed $100 per barrel. This surge has been driven by rising tensions in the Middle East and supply disruptions in the Strait of Hormuz.

This surge in oil prices has raised fears of rising inflation, leading to growing market expectations that the US Federal Reserve may keep interest rates stable at its two-day policy meeting on March 18.

According to market estimates, the probability of the Fed keeping interest rates unchanged in June has risen to more than 51 percent, up from less than 43 percent last week.

Analysts say that the level of Rs 1,48,000 is considered a strong support for gold, while the level of Rs 1,53,000 could be a resistance.

Meanwhile, strong buying is being seen around $5,000 in the international market, COMEX. If prices remain stable above $5,400 to $5,600, gold could reach new record highs.

Market experts believe that despite volatility, the medium and long-term outlook for silver remains positive as global geopolitical conditions and market signals are in its favour.