Gold prices rose for the second consecutive session in Delhi on Thursday, October 1, with the yellow metal gaining ₹500 per 10 grams amid a weaker rupee and firm international prices. Silver, however, moved in the opposite direction, declining ₹5,000 per kg.
Gold of 99.9% purity increased to ₹1,49,800 per 10 grams, inclusive of taxes, compared with ₹1,49,300 at the previous close. The latest rise came a day after gold gained ₹700 from a two-month low.
Why did gold prices rise?
One of the key factors supporting domestic gold prices was the weakness in the Indian rupee. The rupee slipped below the ₹96-per-dollar mark and closed at ₹96.31 against the US dollar on Thursday, its weakest closing level in more than two months.
Since India imports most of its gold, a weaker rupee makes the metal more expensive in domestic currency terms, providing support to local prices.
Gold also received support from softer-than-expected US inflation data, which reduced expectations of a Federal Reserve rate hike. Lower expectations of higher US interest rates can support gold by reducing the opportunity cost of holding the non-yielding asset.
Global gold prices remain firm
International gold prices also edged higher on Thursday. Spot gold rose $11.94, or 0.29%, to $4,169.06 per ounce. However, the gains remained limited by higher oil prices and continued uncertainty surrounding the Strait of Hormuz, according to commodity analyst Praveen Singh of Mirae Asset Sharekhan.
Despite the two-day recovery, gold remains lower for the week, having declined ₹2,800, or nearly 2%, during the period.
Silver price falls ₹5,000
Silver prices weakened sharply in the domestic market. The precious metal fell ₹5,000 to ₹2.27 lakh per kg on Thursday, compared with ₹2.32 lakh per kg at the previous close.
Silver has now declined ₹10,000, or around 4.2%, this week, showing a sharper weekly fall than gold.
Interestingly, silver prices were also firmer in international markets, where the metal was trading around $60.79 per ounce after gaining nearly 1%. This highlights the difference between domestic and international price movements, with currency movements and local market conditions also influencing Indian prices.
US economic data in focus
Market participants are now watching upcoming US economic indicators, including the ISM Manufacturing PMI and weekly jobless claims, along with comments from Federal Reserve officials. These developments could influence expectations around US interest rates and subsequently affect global gold prices.
India's bullion markets will remain closed on Friday, October 2, on account of Gandhi Jayanti.
At present, gold is showing a short-term recovery after its recent decline, while silver has come under renewed selling pressure. The rupee, US interest-rate expectations and global economic data remain key factors to watch for the next move in precious metals.
