Mumbai (Maharashtra) [India], March 23 : Gold and silver prices in the domestic market witnessed a sharp decline of more than 7 per cent on Monday amid ongoing tensions in West Asia, global economic concerns and a strengthening US dollar, which has shifted investor interest away from precious metals.
Gold prices fell sharply during the session, dropping from Rs 140158 in the opening trade to Rs 129595, and currently trading at Rs 134 marking a steep fall of over 7 per cent.
Silver prices also saw a similar trend, declining by more than 7 per cent and trading at Rs 209,797 per kg, after hitting a low of Rs 199643 during the day, indicating high volatility in the market.
Market experts attributed the decline to a combination of rising inflation concerns, higher interest rate expectations and a stronger dollar.
Colin Shah, MD, Kama Jewelry, said the sharp dip in gold prices is a ripple effect of the ongoing tensions in West Asia.
"The disrupted oil supply has led to a rise in the price of crude, which is being perceived as a major inflationary trigger, along with which will drive cautiousness among the central banks. As a result, interest rates are expected to rise and directly impact domestic consumption," he said.
He added that the strengthening of the US dollar is also pushing investors away from gold.
"While the long-term outlook of the yellow metal continues to remain positive, both international and domestic economies are going to see strong tremors due to the conflict and gems and jewellery exports will be impacted the most," he noted.
Manav Modi, Commodities Analyst at Motilal Oswal Financial Services, said gold prices have been under pressure due to rising inflation concerns and expectations of higher interest rates.
He noted that escalating geopolitical tensions, including the US-Israel conflict with Iran, have increased fears of prolonged disruptions in global energy supply, further fuelling inflation concerns.
"Markets now expect that sustained high oil prices could force central banks to adopt a more hawkish stance, limiting the appeal of non-yielding assets like gold," he said.
He added that the shift in rate expectations has been significant, with markets moving from pricing in multiple rate cuts earlier to now factoring in a pause and even a small probability of a rate hike.
Overall, the sharp fall in precious metal prices reflects the impact of global economic conditions, rising interest rate expectations and geopolitical tensions on investor sentiment.