MCX gold drops 6% to ₹1.36 lakh/10 gms, silver tanks 9% amid rising inflation fears as West Asia war continues

At around 11:30 AM, the contract was trading ₹3,080 or 5.64% lower at ₹1,36,344 per 10 grams in business transactions of 5,886 lots, tracking a decline in international prices. In the previous week, the yellow metal contract tanked 9%.

Globally, COMEX gold (April expiry) fell as much as 5.5% to the day’s low of $4,322 per troy ounce. At the time of writing, it stood at $4,322.50 per troy ounce, down by 5.52%. It declined 10% in the previous week, marking its worst weekly fall in 43 years.

Similarly, silver futures for expiry in May slipped as much as ₹19,672 or 8.67% to an intraday low of ₹2,07,100 per kilogram on the MCX. At the time of writing, it was trading at ₹2,07,453 per kilogram, reflecting a ₹19,319 or 8.52% drop in business transactions of 6,046 lots. In the past week, it declined nearly 13%.

In the international markets, COMEX silver fell as much as 7.84% to the session’s low of $64.20 per ounce. It was trading 7.82% lower at $64.215 per ounce at the time of writing. Over the past week, the contract dropped more than 14%.

Why are gold, silver prices falling?

Prices of precious metals declined amid concerns about rising inflation, as the war in West Asia stoked a global energy crisis that has sent Brent crude oil prices soaring. On Monday, Brent Crude oil surged to an intraday high of $114.35 per barrel (bbl). The contract has hovered over the $100 per bbl mark in the past week.

As the Middle East war enters its fourth week, CME Group’s FedWatch shows that market participants have shifted from betting on rate cuts to potential rate hikes. According to the data, market participants assigned a 12.4% probability that the US Federal Reserve will raise rates in April, up from 0% in the past week. Market participants bet on an 87.6% probability that the Federal Reserve will keep the policy rate unchanged.

On the macroeconomic front, Investors will track key data this week, including provisional manufacturing and services PMI readings from the US, UK, and Japan, along with consumer sentiment and jobless claims.

The Indian rupee fell to a new low of 93.92 against the US dollar in early market hours on Monday, March 23. Meanwhile, the dollar index, which gauges the greenback's strength against a basket of six currencies, was trading 0.09% higher at 99.74.