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There was a sharp correction in silver prices on April 2, with the precious metals being pressured by geopolitical tensions and the rising US dollar, and silver prices fell by almost 6% on MCX. The fall occurred after remarks by the former US President Donald Trump, who indicated further military intervention in the Middle East in the coming weeks that could provoke instability in commodities.
On the Multi Commodity Exchange (MCX), silver rates fell by Rs. 13,613 or 5.6% to Rs. 2,29,888 per kg, one of the highest one-day declines in recent weeks. The prices of gold also had a downward movement of Rs. 2,547 or 1.65% to Rs. 1,51,161 per 10 grams.
The sudden decline underscores that sentiment in bullion markets can swiftly change even in times of geopolitical uncertainty.
Silver prices dropped 2.9% in the global market to 72.95 per ounce, and spot gold prices dropped 1.3% to 4,694.48 per ounce. US gold futures also dropped 1.9% to $4,723.70.
The weakness was reflected in other precious metals. Platinum fell 1.8% to 1,928.26, and palladium fell 1.4% to 1,451.85, suggesting a general sell-off in the segment.
Gold surged sharply in the earlier session, up 1% to its highest point since March 19, but it turned around sharply because of macro factors.
The key reason for the downfall was the surge in the US dollar and the bond yields after Trump's speech. The price of crude oil increased by over 4%, indicating the anticipation of the extended geopolitical disputes.
An appreciated dollar makes commodities traded in the currency more costly to the international investors, decreasing demand.
Meanwhile, the increasing US Treasury yields add the opportunity cost of holding assets that do not yield, such as gold and silver, adding further pressure on prices.
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The bearish sentiment was also supported by market expectations regarding the US monetary policy. Investors are now pricing in low probabilities of interest rate cuts by 2026, and the chances are only about 25% of a rate cut by December.
The Federal Reserve officials have been cautious in their approach, indicating that there are high risks of inflation. This attitude lowers the attraction of the bullion, which generally thrives in a low-interest-rate environment.
