Gold price drops to ₹1.46 lakh, falls ₹8,500 in 10 days: What next for the yellow metal?

Gold prices remained under pressure on Tuesday, with the MCX October gold contract falling 0.20% to around ₹1.46 lakh per 10 grams. The yellow metal has fallen around ₹8,500 over the past 10 days and is hovering near a seven-week low, driven largely by rising US Treasury yields, a stronger dollar and expectations that the Federal Reserve could keep interest rates higher for longer.

The sell-off follows a nearly 4% plunge on Monday, with global spot gold slipping below $4,200 an ounce and touching a seven-week low near $4,110.

For Indian investors, 24K gold prices were around ₹14,880 per gram, or ₹1,48,800 per 10 grams, while 22K gold was at ₹13,640 per gram. Silver was priced at ₹240 per gram, or ₹2.4 lakh per kg.

Why is gold falling?

Higher US bond yields have emerged as the biggest headwind for bullion. The US 10-year Treasury yield climbed from 4.96% on September 22 to 5.18% on September 24 and remained elevated at 5.17% on September 25.

A rise in yields increases the opportunity cost of holding non-yielding assets such as gold. At the same time, a firmer dollar has added to the pressure on the metal.

“Spot gold is attempting a recovery today and is hovering around $4,140 an ounce after yesterday’s sharp 4% decline,” said Kaynat Chainwala, AVP, Commodity Research, Kotak Securities.

She said stalled US-Iran talks pushed oil prices higher and strengthened expectations that the Fed could remain hawkish for longer. The rise in the US 10-year yield above 5.2%, along with a firm dollar near two-month highs, added further pressure on gold.

US data, Fed policy in focus

The next major trigger for bullion will be US economic data due this week, particularly the Core PCE Price Index, unemployment data and non-farm payrolls.

“Gold remains vulnerable to further pressure if upcoming inflation and labour-market data point to persistent price pressures and increase the scope for monetary tightening,” Chainwala said.

A hotter-than-expected PCE reading, stronger payrolls or a hawkish Fed stance could keep yields and the dollar elevated, while softer data or a more patient Fed could trigger a relief rally, she added.

Jateen Trivedi, VP Research Analyst-Commodity and Currency, LKP Securities, said the Fed’s hawkish tone and higher US bond yields have increased expectations of a higher-for-longer rate cycle, weighing on bullion.

“Gold is likely to remain highly volatile, with the range seen between ₹1,44,000–₹1,49,500,” Trivedi said.

Key levels to watch

Aamir Makda, Commodity & Currency Analyst, Technical Research, Choice Broking, said gold is trading near seven-week lows as markets assess the possibility of higher US interest rates.

“Key support levels would be at ₹1,48,380-₹1,47,950 respectively. On the other side, resistance would be at ₹1,49,500,” Makda said.

He added that a firm dollar and rising bond yields could continue to pressure gold, while higher oil prices and Middle East tensions could keep inflation concerns elevated.

What next for gold?

The near-term outlook will hinge on US economic data, oil prices and the Federal Reserve’s rate path. According to the Augmont Daily Report by Dr. Renisha Chainani, Chief Research Officer (CRO), Augmont Bullion, the CME FedWatch Tool now shows a 72.5% probability of a Fed rate hike in October, up from 57.6% a week ago, adding pressure on bullion.

Gold has broken below the key $4,250 support, with the next downside levels at $4,100 and $4,000, while $4,300 is seen as immediate resistance, the report said.

Geopolitical developments will also remain crucial. Continued tensions could keep energy prices and yields elevated, while meaningful progress towards de-escalation could ease inflation and rate concerns.

For the domestic market, the combination of higher US yields, a stronger dollar and elevated oil prices could keep gold volatile in the near term.