Mumbai: Gold and silver prices fell sharply on the Multi Commodity Exchange (MCX) on Tuesday, August 18, as investors booked profits following a strong rally in the previous session. MCX gold for October delivery slipped below the Rs 1.55 lakh mark per 10 grams, while silver futures declined by more than Rs 2,600 per kg.
The decline came amid rising crude oil prices, which increased concerns about inflation and reduced expectations of an immediate easing in US monetary policy. Higher US Treasury yields also weighed on demand for non-yielding assets such as gold.
Despite the fall, analysts said gold continues to receive support from investment demand, particularly from China.
MCX gold falls below Rs 1.55 lakh
MCX gold October futures were trading at Rs 1,55,160 per 10 grams, down Rs 780, or 0.50%, during Tuesday’s morning session.
The precious metal touched an intraday low of Rs 1,54,925, falling more than Rs 1,000 from the previous close at one point.
The decline followed a strong rally in the previous session, prompting investors to lock in profits.
Gold has delivered substantial gains over the past year, making profit-taking a natural feature of the market after sharp upward movements.
The fall below Rs 1.55 lakh is therefore being viewed more as a correction following the recent rally than as evidence of a fundamental collapse in bullion prices.
Silver price drops by more than Rs 2,600
Silver came under even greater pressure on Tuesday.
MCX silver September futures fell Rs 2,651, or 1.11%, to Rs 2,35,397 per kg. The contract touched an intraday low of Rs 2,35,201 per kg.
The decline highlights the greater short-term volatility generally associated with silver compared with gold.
Silver is influenced not only by investment demand but also by industrial consumption. This gives the metal exposure to both precious-metals sentiment and expectations for global economic activity.
The sharp move also follows a substantial rally in silver prices over the past year.
According to NDTV Profit’s earlier price data, silver 999 fine was trading at around Rs 2,36,150 per kg at the India level on August 12, while prices had risen more than 100% over the previous year.
Why are gold prices falling today?
One of the key factors behind Tuesday’s decline is the increase in crude oil prices.
Higher crude prices can raise inflationary pressure across major economies. This can influence expectations surrounding central-bank interest rates, particularly the US Federal Reserve.
When investors expect interest rates or bond yields to remain higher, gold can lose some of its appeal because the metal does not generate interest income.
The rise in US Treasury yields therefore added pressure to bullion prices.
At the same time, the dollar’s movement and expectations around US monetary policy remain important factors for international gold prices.
Profit booking weighs on bullion
The immediate trigger for the decline appears to be profit booking.
Gold had rallied strongly before Tuesday’s session, giving investors an opportunity to lock in gains.
Jigar Trivedi, Senior Research Analyst at IndusInd Securities, said investors opted for profit booking following the strong rally. He also noted that bullion could face further pressure amid higher oil prices and US Treasury yields.
Profit booking is particularly common when an asset reaches elevated price levels after a rapid rise.
Therefore, a single session of decline does not necessarily signal a longer-term reversal.
China remains a support for gold
Despite the near-term pressure, gold continues to have an important source of support from China.
Trivedi identified rising investment demand from China as the main supporting factor for gold prices at present.
Strong investment demand can help limit declines when other factors, such as higher yields or crude oil prices, are working against bullion.
China is one of the world’s most important markets for gold, and changes in Chinese investor demand can have a significant impact on global prices.
If demand remains strong, it could provide a cushion for gold during periods of profit booking.
Gold price outlook on MCX
Analysts have identified important technical levels for MCX gold.
According to Jigar Trivedi, immediate support for MCX gold is around Rs 1,55,000 to Rs 1,54,800 per 10 grams, while resistance is placed at Rs 1,55,600 to Rs 1,55,800.
These levels will be important for traders looking to assess whether the current correction remains limited or develops into a deeper decline.
A sustained move below the immediate support zone could increase selling pressure.
On the other hand, a recovery above the resistance area could indicate that buyers are returning after the recent profit-taking.
Gold has delivered strong yearly returns
The current correction needs to be viewed against gold’s broader performance.
Gold prices have risen substantially over the past year, making the yellow metal one of the strongest-performing traditional investment assets.
That strong performance has been supported by several factors, including investment demand, geopolitical uncertainty, central-bank buying and expectations surrounding global interest rates.
The sharp increase in prices has also resulted in greater sensitivity to profit booking.
Investors who accumulated gold at lower levels may choose to reduce positions when prices rise sharply, leading to short-term corrections such as the one seen on Tuesday.
Silver remains highly volatile
Silver’s 1.11% fall on Tuesday demonstrates the metal’s higher volatility.
Unlike gold, silver has a significant industrial component to its demand. It is widely used in areas including electronics, solar technology and other industrial applications.
Consequently, silver prices can respond to both changes in precious-metals investment sentiment and expectations for industrial demand.
The metal has also experienced an extraordinary rise over the past year. NDTV Profit reported on August 12 that silver 999 fine had risen 107.49% over the previous year.
That substantial gain means sharp corrections can occur when traders decide to book profits.
What investors should watch now
Investors will closely monitor several factors in the coming sessions.
The first is crude oil. A sustained rise in oil prices could keep inflation concerns elevated and influence expectations around US interest rates.
The second is US Treasury yields. Higher yields can make interest-bearing assets more attractive compared with gold.
The third is the US dollar. Movements in the dollar can affect the international price of bullion and, consequently, domestic prices.
Chinese investment demand will also remain important.
Finally, traders will watch the technical support levels identified by analysts to determine whether Tuesday’s decline is simply a temporary correction or the beginning of a more sustained pullback.
Gold and silver remain expensive by historical standards
Even after Tuesday’s decline, both metals remain at elevated levels.
MCX gold was still around Rs 1.55 lakh per 10 grams, while silver remained above Rs 2.35 lakh per kg.
For consumers, these prices are significantly higher than levels seen in previous years.
This has implications for jewellery demand as well as investment demand.
Higher prices can discourage some jewellery purchases, while investors who believe the long-term outlook remains positive may continue accumulating gold through physical bullion or financial products.
Correction does not necessarily change the long-term outlook
The current decline illustrates the difference between short-term price movements and long-term market trends.
Gold can experience significant daily fluctuations even when the broader trend remains positive.
Similarly, silver’s high volatility means that daily declines can be considerably larger than those seen in gold.
Investors should therefore avoid interpreting a single day’s movement as a definitive change in direction.
Instead, the evolution of crude prices, US yields, the dollar, Chinese demand and global economic conditions will be more important in determining the broader trajectory of precious metals.
Conclusion
Gold and silver prices fell sharply on MCX on Tuesday, August 18, with investors booking profits after the previous session’s rally. MCX gold October futures fell Rs 780 to Rs 1,55,160 per 10 grams, after touching Rs 1,54,925, while September silver futures declined Rs 2,651 to Rs 2,35,397 per kg.
The correction was driven by profit booking, rising crude oil prices, inflation concerns and higher US Treasury yields. These factors can reduce the appeal of non-yielding assets such as gold.
However, the broader outlook remains dependent on global investment demand, with Chinese buying providing an important source of support.
For traders, the Rs 1,55,000-Rs 1,54,800 zone is an important support area for MCX gold, while Rs 1,55,600-Rs 1,55,800 represents the immediate resistance zone identified by analysts.