The shine of expensive metals faded last month. On Friday, gold prices had reached a one-year low, while the prices of silver, platinum and palladium fell sharply.
It technically reached the oversold zone.
This decline has come at a time when shares of tech companies have fallen amid concerns about adequate returns from spending on artificial intelligence.
Both gold and silver recorded negative returns for the second consecutive month. The rise in crude oil prices, fears of rising inflation and concerns about a possible increase in interest rates in the US played an important role in putting pressure on the precious metals market.
"Expectations of monetary policy tightening continue to weigh on assets that do not generate interest or regular income," DHF Capital's Bas Kooijmans said in a note.
"Strong oil prices are raising concerns that inflation will remain high for a longer period of time, deepening the pressure," he said.
Fall in oil prices may reduce pressure on gold. At the same time, the possibility of a tight monetary policy may become stronger if there are further disruptions in the supply chain or if the US employment data for October is better than expected. This may keep pressure on gold prices.
By the end of October, the price of gold on Comex fell by 7.26 percent to $ 3,884.9 an ounce. At the same time, a huge fall of 19.1 percent was recorded in the price of silver on Comex last month and it closed at $ 49.13 an ounce.
In line with the trend in the global markets, the prices of precious metals closed lower in the domestic markets also. On MCX, the price of gold fell by 7.16 percent to Rs 1,38,419 per 10 grams. At the same time, the price of silver fell by 20 percent and closed at Rs 1,78,900 per kg.
On October 30, the price of gold on the COMEX fell to a one-year low and closed well below the psychological level of $4,000 an ounce.
This is a big sign of weakness, as the gold price has also broken the previous support level of $3,900.
Now the price of gold on Comex may fall to the next support level of $3,650-3,750. To reverse the weak trend for gold, the price will have to overcome the upper level of $4,550.
Last month, the price of silver on Comex also remained weak and it fell below the support level of $54. After breaking this important support level, the price declined further and reached a low of $48.9 on Friday.
It is being said that in the short term the trend of silver remains negative and its price may fall to the range of $42-43. To end this negative trend, silver price will have to cross the resistance level of $55.
The price of gold has fallen 30 percent since reaching a record high of $5,595 an ounce in January.
News agency Reuters has written in its report, "The reason for this is the fear that interest rates will remain high for a long time." At present, there is pressure on gold prices due to weak demand in Asia. However, analysts say that whenever the price of gold goes below $4,000, its purchases by central banks usually start increasing.
At the same time, silver is increasingly being seen as a commodity whose price depends on industrial growth. According to Reuters, HSBC has said that the demand for silver industry and jewelery is declining. The bank expects the average price of silver in 2027 to be $ 64 per ounce, while its average estimate for this year is $ 71 per ounce.
Currently, to buy one ounce of gold, 79 ounces of silver is required. This is the highest ratio in 11 months. In January, when the price of silver reached a record high of $122 an ounce, 46 ounces of silver were required to buy one ounce of gold.
Reuters has written, "From a historical perspective, there is still scope for further decline in the price of silver compared to gold." According to consultancy firm Metals Focus, the average ratio of gold and silver between 2020 and 2025 was 82.
What could be the future path of gold and silver?
Gaurav Arora, Head of Research at financial affairs research institute Sahi, told The Live Mint that fears of interest rate hike in America have increased the pressure on gold prices.
According to Arora, the US Federal Reserve had kept interest rates stable in the range of 3.75-4 percent in October, but two members of the committee had voted in favor of increasing the rates. At the same time, the market has started moving keeping in mind the possibility of another increase in interest rates in December.
Arora said, "In the last one month, there has been a continuous decline in the futures price of gold on MCX." At present, its immediate support level is Rs 1,38,250 per 10 grams. If the price goes below this level, another round of selling may begin. Generally, there is a lot of fluctuation in the prices of silver. For this, the level of Rs 1,78,800 per kg is the immediate support level.
According to Arora, "Despite the recent decline, the broad trend still remains weak." In such a situation, instead of making a lump sum purchase around Dhanteras, buying gold in two or three installments can be a better strategy. He also advised that the share of investment in silver should be kept less than in gold, because its prices fluctuate more.
Vandana Bharti, Head of Commodity Research, SMC Global Securities, believes that the sharp fall in precious metal prices could create a buying opportunity for long-term investors.
He mentioned previous occasions when there was a sharp increase in demand for physical gold after a sell-off in the market due to the need for cash. In the 1970s, the price of gold was below $40 per ounce in 1970, which increased to about $850 per ounce by January 1980.
Similarly, during the global financial crisis of 2008, when investors had to sell their assets to raise cash, the price of gold initially fell to around $700 an ounce. However, after this it increased rapidly and by August 2011 it reached $ 1,917 per ounce.
A similar trend was also seen during the market decline during the Corona epidemic in March 2020. Amidst the rush to raise cash, the price of gold had fallen to about $ 1,472 an ounce. But later investors increased their investments in physical gold and exchange traded funds (ETFs), which led to a sharp recovery in prices.
Bharti said these examples show that buyers with long-term exposure to precious metals may become active during a downturn in liquidity.
From the point of view of investors, Bharti sees the recent decline in gold as a possible opportunity to buy gradually. At present the price of gold in the domestic market is around Rs 1.38 lakh per 10 grams.
They estimate that due to purchases by central banks, exchange rate fluctuations and the role of gold as a hedge against inflation, the price of gold in the domestic market may reach Rs 1.65 lakh to Rs 1.80 lakh per 10 grams by 2027. However, this is only an estimate and is not a guarantee.
What are COMEX, MCX and future rates?
Comex is a major market in America, where gold and silver contracts are bought and sold. Whereas future rates i.e. future price is the price at which a deal is fixed for delivery in some future month under a contract today.
This does not mean that the price of gold or silver will definitely be the same at that time. COMEX gold futures are used as a major benchmark for pricing in international markets.
COMEX can be thought of as an organized wholesale market, not as a jewelery shop. It is part of the CME Group's exchange business, where standard contracts for metals such as gold and silver are traded.
What does 'Gold Futures Rate' mean?
Let's take a hypothetical example. Gold futures are trading at $4,000 an ounce in December. This means that traders can currently buy or sell December standard gold contracts at this price.
This does not mean that the price of gold will definitely be $4,000 in December. Understand this with an easy example. A buyer and a supplier decide today at what price the goods will be supplied in the future. They set transaction prices, not predict that prices will be the same everywhere in the market.
Why is COMEX mentioned in gold news in India? COMEX provides a major benchmark for the international market, while MCX is India's exchange where gold and silver futures are traded.
The price shown in dollars on COMEX is not the same as the retail price of jewelery in India or the price shown in rupees on MCX.
Difference between Comex and future rates
COMEX is a market whereas future rate is the price quoted in that market. Understand this with the example of vegetable market. Mandi is a market, while the price of vegetable is Rs 30 per kg. Similarly, COMEX is an exchange, while "gold at $4,000 an ounce in December" is a futures quote.
What is the difference between MCX (Multi Commodity Exchange) and COMEX (Commodity Exchange Inc.)?
Both MCX and COMEX are markets where commodities like gold and silver are traded. The simplest difference between them is that MCX is in India and quotes the prices of these metals in rupees, whereas COMEX is based in America and quotes the prices in dollars. Futures contracts are traded on both.
Suppose you see these two imaginary news – gold on Comex is at $ 4,000 per ounce and gold on MCX is at Rs 1,20,000 per 10 grams. These are the prices of gold in two different markets, expressed in different currencies and units of weight.
You cannot compare these two numbers directly. Consider it like comparing the price of petrol in dollars per gallon with the price of petrol in rupees per liter. Apart from this, while comparing the futures prices, it should also be seen whether the delivery month of both the contracts is the same or not.
The two markets are interconnected, but prices do not necessarily fluctuate by exactly the same percentage. Gold prices in India depend on international market prices as well as the exchange rate of rupee and dollar and other factors in the domestic market. If the price of gold increases in the international market, then generally there will be pressure on MCX to increase the price of gold.
From COMEX you get to know the international price of gold, while from MCX you get to know the price of Indian futures market. None of these prices are the same as the final price offered by jewelers to customers.
