Update (October 17): Since this report, the Reserve Bank of India raised its repo rate to 5.50% on October 7, its first hike since February 2023 (our report), and US consumer inflation rose to 3.7% in September (our report). Both point to tighter interest-rate conditions, which usually weigh on non-yielding assets such as gold.
New Delhi, September 18: Gold and silver prices fell sharply in India on Thursday, September 17, after the US Federal Reserve raised interest rates this week and signalled that more increases could follow. On the Multi Commodity Exchange (MCX), gold fell by between about 1% and 2.7% at different times of the day, and silver fell even more sharply.
Key highlights
- The Fed raised its policy rate by 25 basis points to a range of 3.75% to 4.00%, its first increase since 2023.
- Spot gold slipped to around $4,312 an ounce in international markets.
- On MCX, 24-carat gold traded at roughly ₹1.51 lakh to ₹1.53 lakh per 10 grams, according to different reports.
- Silver fell 2% to 4%; at different times it was down by about ₹2,300 to ₹10,000 per kilogram.
- Higher US rates make interest-bearing assets more attractive than gold, which pays no interest.
What the Fed did
The Federal Reserve raised the target range for its benchmark rate by 25 basis points to 3.75%–4.00% on September 16, its first hike since 2023, Trading Economics reported. The decision was unanimous. In updated projections, 16 of 18 officials saw room for at least one more quarter-point increase this year. Policymakers said inflation remained elevated; the Fed now projects 2026 PCE inflation at 3.7%.
Recent comments from Fed Chair Kevin Warsh had already told markets that further increases were possible. Higher interest rates usually hurt gold, because bonds and deposits that pay interest become more attractive to investors. Selling in global gold markets after the decision fed directly into Indian prices, which largely follow the international price and the dollar-rupee exchange rate.
How prices moved through the day
Selling dominated gold and silver from the opening of Indian commodity trading on Thursday. Reports gave slightly different figures: some put gold about 1% lower in morning trade, while later reports showed the fall widening to about 2.7%. The difference is mainly about timing, because commodity prices change all day and outlets recorded them at different moments. The Press of Asia has not treated any one figure as final; the clear trend through the day was a steady fall.
| Reported fall in gold | Approximate move per 10 grams |
|---|---|
| About 1% (morning reports) | ≈ ₹1,520 |
| About 1.3% (“nearly ₹2,000”) | ≈ ₹2,000 |
| About 2.7% (later reports) | ≈ ₹4,100 |
Our calculation: the rupee figures apply each percentage to ₹1.52 lakh per 10 grams, the middle of the reported MCX range. They are rounded and are meant only to show scale; actual moves depended on the contract and the time of the trade.
Background
Gold had hit record highs several times earlier this year, driven largely by global uncertainty and central-bank buying. The Fed’s tightening has put a brake on that rally for now. Pressure had been building for weeks: see our September 7 report on gold under pressure from Fed rate-hike bets.
What it means for India
India is one of the world’s largest consumers of gold, and demand rises in the festival and wedding seasons. Lower prices can be a relief for jewellery buyers, but they mean losses for investors who bought recently. Jewellers and bullion dealers are also affected, because swings change the value of their stocks.
Domestic gold prices are set by a mix of import duty, the international price and the dollar-rupee rate, so global decisions such as the Fed’s show up quickly in Indian prices. If the Fed moves towards more hikes in the coming weeks, gold could stay under pressure, though festive demand in India may partly offset that.
What to watch
- Further Fed statements and US economic data, which will shape how fast and how far rates rise.
- The dollar-rupee exchange rate and the international gold trend.
- Festive and wedding-season demand in India, and how jewellers price it.
This article was first published in Hindi and has been translated. The Press of Asia now publishes in English only.
Sources
The Business Desk covers markets, the economy, companies and personal finance. Stories are checked against at least two credible sources before publication.
