Precious metals experienced a significant market correction, with gold settling sharply lower by -2.52% at ₹1,23,561 and silver plummeting by -3.97% to ₹1,56,018. The sharp decline was triggered by a wave of hawkish commentary from U.S. Federal Reserve officials, which fundamentally shifted market expectations away from a near-term interest rate cut in December.
The Fed officials highlighted persistent inflation risks and a resilient labour market, prompting traders to reassess their outlook. The probability of a December quarter-point cut, as tracked by the CME FedWatch Tool, fell significantly to 49%, down from 64% earlier. This sentiment was reinforced by statements from officials like Fed Kashkari, who questioned the need for the recent October rate cut given the economy’s ongoing resilience.
The conclusion of the record-long 43-day U.S. government shutdown, which President Donald Trump signed into law, was intended to stabilize markets. However, the shutdown’s duration meant that crucial economic data, such as October unemployment and inflation figures, may not be released, leaving the markets without key indicators and adding to the overall sense of uncertainty.
Physical Market and Global Demand Trends
The broad market sell-off in precious metals occurred despite a strong underlying global demand for gold. The World Gold Council reported that global gold demand rose 3% year-on-year (YoY) to 1,313 tons, marking the highest demand on record for any single quarter. This surge was primarily driven by strong investment demand. ETF inflows surged 134%, and bar and coin demand jumped 17%, successfully offsetting a 23% fall in jewellery fabrication.
In stark contrast, physical demand across major Asian hubs remained subdued due to the elevated prices. India felt the sharpest impact, with dealer discounts widening to $43 per ounce, the highest level in five months, compared to $14 the previous week. In China, gold traded between an $8 discount and a $4 premium, while premiums were observed in Singapore ($1.50–$3.50), Hong Kong ($0.50–$2.50), and Japan (at par to $0.50 premium). Meanwhile, the IBJA (India Bullion and Jewellers Association) urged the government to close a loophole allowing duty-free imports of platinum-alloy jewellery containing 90% gold.
The Outlook for Silver
Silver mirrored gold’s movements, being “dragged down by a broad market sell-off”. Despite the price drop, the physical market is showing signs of easing liquidity constraints; silver holdings in London vaults rose 6.8% to 26,255 tons, with 1,674 tons flowing in during October. However, borrowing costs for silver in London remain historically high. Investor interest in silver remains firm, with silver ETP holdings up 18% year-to-date (YTD), driven by concerns over stagflation, geopolitical tensions, and US debt.
Technically, the gold market is currently under long liquidation, with open interest down 0.06%. Gold now finds crucial support at ₹1,21,220, with the possibility of testing ₹1,18,885 if that level is breached. Resistance is placed at ₹1,26,470, with further upside potential toward ₹1,29,385. Silver’s trading range is set between ₹1,47,610 and ₹1,67,540.
