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Gold and silver keep falling before Diwali: silver down Rs 16,503 a kg in four days, gold near Rs 1.42 lakh
Silver has fallen Rs 16,503 a kg in four trading days to Rs 1,94,415, and gold is down about Rs 4,800 per 10 grams to Rs 1,41,630, by IBJA rates. Higher crude, rising yields and a firmer dollar are being blamed. Dhanteras is on 6 November and Diwali on 8 November.
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Gold and silver prices have kept falling ahead of Diwali, with silver losing Rs 16,503 a kg in four trading days. According to rates of the India Bullion and Jewellers Association, silver went from Rs 2,10,918 a kg on 16 October to Rs 1,94,415 by Friday. Gold fell by Rs 4,796 per 10 grams, from Rs 1,46,426 to Rs 1,41,630. Dhanteras, the day on which many Indians buy gold, falls on Friday, 6 November, and Diwali is on Sunday, 8 November.
The numbers
On the Multi Commodity Exchange, the December silver contract fell from Rs 2,11,187 a kg to Rs 1,96,100, a drop of Rs 15,087. The December gold contract fell by Rs 5,768 per 10 grams, from Rs 1,47,918 to Rs 1,42,150, and it ended the week near Rs 1,42,024 after touching a low of Rs 1,41,334. In global trade, gold lost about 4 per cent in the week, its weakest weekly performance in more than four months, and ended near $4,008 an ounce.
Silver is still far below its peak. It touched a record of Rs 4,20,048 a kg in late January this year, so the present price is about Rs 2.25 lakh below that high. In Chennai, the retail price of 24-carat gold fell by Rs 5,560 per 10 grams over the week, from Rs 1,48,190 to Rs 1,42,480.
Why prices are falling
The reasons are overlapping, and no single one explains the fall.
- Oil and inflation: Brent crude rose above $112 a barrel, and later to about $116, after Houthi strikes on Saudi energy sites and fears of a new US strike on Iran. Higher energy prices can keep inflation up and interest rates high.
- Interest rates and yields: When rates and Treasury yields rise, gold, which pays no interest, looks less attractive.
- A firmer dollar: A stronger US dollar makes gold more expensive for buyers who pay in other currencies.
- Forced selling: A correction in technology shares led investors to sell their most liquid holdings, including precious metals, to meet margin calls.
- Profit-taking: Some investors sold to book gains from the earlier rise.
Analysts say that the daily relative strength index of gold is near 31, close to oversold territory, while the momentum indicator remains negative. That could bring a short-term bounce, but it does not mean that prices have bottomed. In international trade, support is at $3,970 to $4,000, with a break below it pointing to $3,900, and resistance lies at $4,070 to $4,100. On the MCX, support is at Rs 1,40,000 to Rs 1,41,000 and a break could take prices to Rs 1,37,500 to Rs 1,38,300. A key event is the US Federal Reserve's policy meeting on 27 and 28 October, followed by inflation data.
Falling prices have an effect on demand. Jewellers say that a drop in the rate before a festival brings buyers into shops who had put off their purchase, and that people who had stayed away because of record prices earlier in the year come back. The reverse is also true: those who have already bought can feel that they paid too much. Dhanteras and Diwali remain two weeks away, and the market will take a view on the Federal Reserve's meeting and on oil in the meantime.
Jewellery buyers who are shopping for a wedding or the festival may feel some relief, but the price of an ornament is more than the metal rate. GST and making charges, which vary by city and by jeweller, are added, and they reduce the value of jewellery as an investment. Those who want gold as an investment can look at gold exchange-traded funds, which avoid storage and purity worries, or at digital gold, after checking the provider's credibility, costs and the regulatory protection available.
Buying in stages, spread over several price levels or dates, reduces the risk of buying everything just before another decline. Short-term traders may prefer to wait until prices settle above a resistance level. This is general information and not advice, and nobody can say where prices will be on Dhanteras. A buyer who needs gold for a fixed date, such as a wedding, is in a different position from an investor who can wait.
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