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The Indian gold and silver markets experienced a significant downturn on Friday, February 28, 2025, with gold prices dropping by Rs 500 per 10 grams and silver prices plummeting by Rs 2,100 per kg. This decline, according to the All India Sarafa Association, was primarily driven by reduced demand from jewellery traders and increased selling pressure from investors. The national capital witnessed gold prices hitting a two-week low of Rs 87,700 per 10 grams, a notable decrease from the previous trading session's closing price of Rs 88,200. Despite this recent dip, gold prices have seen a substantial increase year-to-date, rising by Rs 8,310, or 10.5 per cent, from Rs 79,390 per 10 grams on January 1. Standard gold (99.5 per cent purity) also followed the downward trend, depreciating by Rs 500 to Rs 87,300 per 10 grams.
Silver prices mirrored the performance of gold, extending losses for the third consecutive day and tanking by Rs 2,100 to reach a two-week low of Rs 96,400 per kg. This sharp decrease represents a significant drop from the previous market close of Rs 98,500 per kg. Market analysts attributed the decline in both gold and silver prices to a rebound in the dollar index, which was bolstered by announcements from the US President regarding new tariffs on Mexico and Canada, scheduled to take effect on March 4th. These tariff announcements, coupled with the imposition of an additional 10 per cent tariff on Chinese imports, raised the total tariff rate to 20 per cent, diminishing market optimism regarding a potential postponement of these tariffs. Rahul Kalantri, VP Commodities at Mehta Equities Ltd, emphasized the inverse relationship between the dollar index and precious metal prices, stating that the stronger dollar exerted downward pressure on gold and silver.
In the futures market, gold contracts for April delivery on the MCX also reflected the bearish sentiment, plunging by Rs 484 to Rs 84,712 per 10 grams. Globally, the Comex gold futures fell USD 21.20 per ounce, or 0.73 per cent, to USD 2,874.70 per ounce, while spot gold decreased by USD 15 per ounce to USD 2,862.53 per ounce. Chintan Mehta, Chief Executive Officer of Abans Holdings, attributed the correction in gold prices to the strengthening US dollar, which was driven by rising US bond yields. These rising yields suggest that the US Federal Reserve may delay rate cuts due to persistent inflationary pressures in the economy, further supporting the dollar's strength and negatively impacting gold prices.
Saumil Gandhi, Senior Analyst of Commodities at HDFC Securities, highlighted that the week's fall in gold was primarily driven by investors booking profits from a recent record-breaking rally. This profit-taking activity, combined with the recovery in the US dollar, contributed to the downward pressure on gold prices. The dollar index hovered around the 107 level on Friday, maintaining its gains from the previous two sessions and poised to close higher after three consecutive negative weekly closings. The strengthening dollar made gold relatively more expensive for international buyers, further dampening demand. The correlation between the dollar index and gold prices is a key factor that investors and traders monitor closely to understand market dynamics. When the dollar strengthens, it typically puts downward pressure on gold prices, and vice versa.
Comex silver futures in the Asian market hours traded 1.21 per cent lower at USD 31.72 per ounce, reflecting the global trend of declining silver prices. The performance of silver is often linked to industrial demand, as silver has various industrial applications in addition to its use as a precious metal. Therefore, economic indicators and industrial activity can significantly influence silver prices. The combined impact of a strong dollar, profit-taking, and potential concerns about industrial demand contributed to the decline in silver prices on this particular day. Overall, the decline in gold and silver prices in India on February 28, 2025, was a multifaceted event influenced by global economic factors, market sentiment, and investor behavior. The strengthening dollar, driven by tariff announcements and expectations of delayed rate cuts by the US Federal Reserve, played a significant role in exerting downward pressure on precious metal prices. The profit-taking activity by investors following a recent rally further exacerbated the decline. While gold prices have still experienced a substantial increase year-to-date, the recent downturn underscores the volatility and sensitivity of the precious metal markets to global economic events and policy decisions. The disclaimer at the end of the article emphasizes that the content is from a syndicated feed and that the original source is responsible for its accuracy, views, and content ownership. Rediff.com India Limited does not necessarily endorse the views expressed in the article, which is a standard practice for syndicated content.
The fluctuations in gold and silver prices are not isolated events; they are interconnected with the broader global economic landscape. Several macroeconomic factors play a critical role in shaping the demand and supply dynamics of these precious metals. Interest rates, inflation, currency movements, and geopolitical tensions are among the key variables that influence investor sentiment and market trends. When interest rates are low, as they have been in recent years, gold tends to become a more attractive investment because it offers no yield. Conversely, when interest rates rise, the opportunity cost of holding gold increases, which can lead to a decrease in demand. Inflation also plays a crucial role; gold is often considered a hedge against inflation, and investors may flock to gold as a safe haven asset when inflation is high. Currency movements, particularly the strength or weakness of the US dollar, have a significant impact on gold prices, as discussed in the article. Geopolitical tensions and uncertainties, such as trade wars, political instability, and military conflicts, can also drive up demand for gold as investors seek to protect their wealth in times of crisis. The US President's tariff announcements, as mentioned in the article, serve as a prime example of how political decisions can trigger market volatility and impact precious metal prices.
The role of investor behavior and market sentiment cannot be overlooked when analyzing gold and silver price movements. Investors' perceptions of risk, their expectations of future returns, and their overall confidence in the economy all contribute to buying and selling decisions. In the case of the recent decline in gold prices, the profit-taking activity by investors who had benefited from the previous rally indicates that some investors believed that the market had reached a peak and that it was time to cash in on their gains. This type of profit-taking is a common occurrence in financial markets and can often trigger short-term corrections in asset prices. Market sentiment is also influenced by news headlines, analyst reports, and economic data releases. Positive news about economic growth, for example, may lead investors to shift their focus to riskier assets, such as stocks, and away from safe haven assets like gold. Conversely, negative news or economic uncertainty may drive investors back to gold as a way to protect their capital. The article highlights the importance of monitoring market sentiment and understanding the factors that influence investor behavior in order to anticipate future price movements in the gold and silver markets.
Looking ahead, the future trajectory of gold and silver prices will depend on a complex interplay of factors, including the pace of economic growth, the direction of interest rates, the level of inflation, and the evolution of geopolitical risks. The US Federal Reserve's monetary policy decisions will be particularly important, as will the course of trade relations between the US and other countries. Any escalation of trade tensions or new tariff announcements could further destabilize the markets and drive investors towards safe haven assets. Additionally, the global supply and demand dynamics for gold and silver will play a role. Increased demand from emerging markets, such as China and India, could support prices, while an increase in gold production or a slowdown in industrial demand for silver could put downward pressure on prices. Investors and traders will need to closely monitor these factors and adjust their strategies accordingly. Technical analysis, which involves studying price charts and identifying patterns, can also be a useful tool for predicting short-term price movements. However, it is important to remember that technical analysis is not foolproof and that fundamental factors ultimately drive long-term price trends. The gold and silver markets are dynamic and constantly evolving, and staying informed and adaptable is essential for success.