Gold Drops 1.21 Per Cent as Inflation Numbers Stir Fed Rate Hike Concerns

Mumbai, Aug 29: India’s gold market closed the week on a weaker note because of the effect of domestic and international factors on gold and silver prices. 

The week, which began with positive sentiments for precious metals following the weakening of the dollar and fiscal risk hedge saw a sharp reversal with the release of unexpectedly higher US inflation figures. This, coupled with the expectations about a decline in import duty on bullion in India, led to book profit as gold futures declined below the mark of ₹1.60 lakh per 10 grams. 

Gold Rose 1.19% to Touch $4,657 on Weaker Dollar and Geopolitical Tensions 

The trading week started out on an upbeat tone for gold prices, which rose by 1.19% to touch $4,657.10 per ounce in early US market deals on Monday, 24 August. This increase was largely spurred by the weakening dollar coupled with continued safe-haven buying on account of geopolitical tensions in the Strait of Hormuz. 

The rally extended further as the week progressed, with gold breaching the $4,600 per ounce mark to hit its strongest level since early June. By Monday, 24 August, spot gold was trading near its session peak at $4,662.71, marking a robust 1.30% gain for the session. The primary trigger for this early-week strength was the US Treasury’s unexpected announcement to double its buybacks of long-dated T-bills. This intervention in the bond market, which included plans for at least $14 billion in extra purchases between September and November, revived the so-called ‘debasement trade’, prompting investors to turn to hard assets as a hedge against ballooning fiscal deficits and a weaker dollar. 

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The Treasury’s move led to a significant decline in long-term bond yields. The 10-year Treasury yield slipped around 6 basis points to 4.65%, while the 30-year yield fell nearly 10 basis points to roughly 5.19%. Concurrently, the US dollar index softened, dropping to around 98.8, further enhancing the appeal of dollar-denominated metals. This powerful combination of fiscal-risk hedging and a weaker dollar outweighed the traditional headwind of still-elevated long-end yields, which remained near their yearly highs. 

Silver Extends August Rally to 18% as Industrial Metal Outperforms Gold 

Silver demonstrated remarkable strength during the early part of the week, mirroring gold’s upward trajectory but with greater momentum. On Monday, 24 August, silver fetched $69.160 per ounce, registering a 0.43% gain on the day. The white metal’s rally was propelled by the same factors driving gold—a softer dollar and the US Treasury’s bond market intervention—but was further supported by a recovery in Indian silver imports after a prolonged slump. 

Also Read: How to Invest in Silver: 6 Best Ways (2026)

The metal’s bullish run saw it rise to a fresh two-month high ahead of the Federal Reserve’s Jackson Hole symposium. By mid-week, spot silver had gained 0.4% to $69.19 per ounce on 26 August, extending its August rally to an impressive 18%. This stellar performance significantly trimmed its year-to-date decline to under 5%.  

Analysts noted that the rally in silver was particularly powered by the US Treasury’s unexpected intervention, which revived the debasement trade—the buying of hard assets as a hedge against ballooning deficits and a weaker dollar. This dynamic, coupled with a 0.8% decline in the dollar index during August, made silver more attractive to holders of foreign currencies. 

Gold Slips 0.52% to $4,633 as Hotter PCE Inflation Data Boosts Yields 

The bullish sentiment that characterised the start of the week was abruptly curtailed on Wednesday, 26 August, following the release of hotter-than-expected US inflation data.  

The US Bureau of Economic Analysis reported that the July Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge, rose 0.2% month-on-month and 3.7% year-on-year. This exceeded forecasts for a 0.1% monthly gain and a 3.6% annual rate. The core PCE, which excludes volatile food and energy prices, also increased by 0.2% on the month and 3.3% year-on-year. 

Also Read: How to Invest in Gold for Beginners: Simple Start Guide 

The inflation data prompted traders to reassess the Federal Reserve’s policy path, leading to higher Treasury yields across the curve. The benchmark 10-year US Treasury yield hovered near 4.7%, while the US dollar index firmed. This development undermined the appeal of non-yielding bullion. Spot gold lost some of its fiscal-risk bid, trading down 0.52% at $4,633.50 an ounce.  

Silver, while also affected, showed relative resilience, trading at $68.720, up 0.26% on the session. The PCE data also increased the chances of a Federal Reserve rate hike next month, with the CME FedWatch tool showing a 40% probability of a September rate hike, up from 33% a week earlier. 

MCX Gold Plunges 1.21% to ₹1,57,726 as Domestic and Global Pressures Mount 

The impact of the global sell-off was acutely felt in the domestic market on Thursday, 27 August, as MCX gold futures slumped sharply. The October gold futures contract tumbled 1.21% in the morning session to trade at ₹1,57,726 per 10 grams. This decline was exacerbated by growing speculation that the Indian government might cut import duties on bullion. 

Market participants priced in the possibility of a reduction in the import duty from the current 15%, a move that would lower domestic gold and silver prices even if global rates remained unchanged. This anticipation led to significant selling pressure in domestic exchange-traded funds (ETFs). Gold ETFs fell between 1.3% and 2.3% at Thursday’s close, while silver ETFs declined 1.2% to 2.3%.  

Also Read: How to Invest in Gold Online

The divergence between Indian and global prices was stark, as global gold traded flat at $4,594 an ounce on Thursday evening, while silver was marginally up 0.1% at $68.18 an ounce. MCX September silver futures also traded almost 1% lower at ₹2,37,528 per kg. 

Gold Prices Dip Below ₹1.58 Lakh as Retail Markets React to Weekly Volatility 

Retail gold prices across major Indian cities mirrored the volatility witnessed in the futures market, ending the week on a softer note. On Friday, 28 August, the 24-karat gold rate in New Delhi stood at ₹1,58,150 per 10 grams, while in Mumbai, the financial capital, it was marginally higher at ₹1,58,430 per 10 grams. The 22-karat gold rate in New Delhi was quoted at ₹1,44,971 per 10 grams, and in Mumbai at ₹1,45,228 per 10 grams. 

The decline was more pronounced in Chennai, where the price of gold fell by ₹600 per sovereign on Friday. The yellow metal was priced at ₹1,17,200 per sovereign and ₹14,650 per gram, after a decrease of ₹75 per gram.  

This marked a significant drop from the ₹1,20,240 per sovereign recorded on Monday, 24 August. Despite the weekly decline, gold prices remained substantially higher compared to the previous year. On 28 August 2025, gold was priced at ₹75,240 per sovereign, marking an increase of ₹41,960 per sovereign or about 55.76% over the year. 

Silver Rates Decline Across Cities as 999 Fine Silver Drops to ₹2.40 Lakh per Kg 

Silver prices also witnessed a downward correction over the week, with retail rates declining across major cities. In the national capital, 999 fine silver was priced at ₹2,39,730 per kg on Friday, 28 August. The MCX silver futures were trading about 0.43% lower at ₹2,40,750 per kg. 

In Chennai, silver prices decreased by ₹5, selling for ₹260 per gram (₹2,60,000 per kg) on 28 August, down from ₹265 per gram on 27 August. This decline followed a period of relative stability, with silver having been priced at ₹275 per gram on 24 August. In Maharashtra, the average silver price on 28 August stood at ₹2,75,900 per kg.  

Check list of Silver ETFs in India

However, in Pune, silver was priced at ₹2,75,000 per kg on 25 August, a decrease of ₹900 per kg compared to the previous day’s rate of ₹2,75,900. The monthly trend for silver in Pune showed a significant increase, with prices rising from ₹2,50,900 per kg on 1 August to ₹2,75,000 per kg on 25 August. 

Treasury Buybacks and PCE Data Drive Weekly Price Swings in Precious Metals 

The week’s price action in the bullion market was largely dictated by two major policy signals from the United States. The initial rally was triggered by the US Treasury’s announcement of increased buybacks of long-dated T-bills. This intervention in the bond market, designed to stabilise long-term yields, unexpectedly boosted gold and silver prices by weakening the dollar and reviving fiscal-risk hedging. The dollar index dropped to around 98.8 following the announcement, making dollar-priced metals more attractive. 

However, this positive sentiment was swiftly reversed by the release of the July PCE inflation data on Wednesday. The hotter-than-expected reading, with headline PCE rising 3.7% year-on-year, reinforced expectations that the Federal Reserve might need to maintain higher interest rates for longer to curb price pressures.  

This development pushed Treasury yields higher, with the 10-year yield hovering near 4.7% , and increased the probability of a September rate hike. The market’s focus then shifted to Federal Reserve Chair Kevin Warsh’s keynote address at the Jackson Hole symposium on Friday, with participants seeking clearer signals on the future path of monetary policy. 

Import Duty Cut Speculation Sparks Divergence Between Indian and Global Markets 

A distinct domestic factor compounded the global pressures on Indian bullion prices during the week. Speculation intensified that the Indian government might reduce import duties on gold and silver. The current import duty on gold stands at 15%, and market rumours suggested that a potential cut, even if partial, could significantly lower domestic prices. This speculation triggered a wave of panic selling in domestic gold and silver ETFs, which track local prices. 

The divergence was stark: while global gold prices remained largely steady, Indian gold ETFs fell by as much as 2.3% . The Nippon India ETF Gold BeES, the largest gold ETF by assets, declined 1.75% on Thursday. Similarly, the Nippon India Silver ETF fell 1.6% . Analysts noted that the market was pricing in the possibility of a duty cut, with the government having introduced the higher duties a couple of months ago amid currency weakness. With conditions now showing signs of normalisation, the market anticipated a potential rollback. This expectation added to the selling pressure, particularly in the domestic futures market, where MCX gold plunged 1.21% . 

The bullion market’s trajectory was heavily influenced by US fiscal and monetary policy signals, alongside domestic import duty speculation. Market participants should closely monitor the Federal Reserve’s policy direction and any official announcements from the Indian government regarding import duties. The divergence between global and domestic prices underscores the impact of local policy expectations. Attention should also be paid to geopolitical developments and physical demand trends from key markets like India and China, which could provide crucial support levels for precious metals. 

 Source 

• https://silverprice.org/silver-price-india.html 

• https://goldprice.org/gold-price-india.html