New Delhi, March 16 Silver prices fell by Rs 9,000 to Rs 2.56 lakh per kg while gold prices dropped by Rs 2,950 to Rs 1.60 lakh per 10 grams in the national capital on Monday, according to the All India Sarafa Association.
Weak global trends and a stronger US dollar affected precious metals, analysts said.
Silver dropped by Rs 9,000, or 3.4 per cent, to Rs 2,56,500 per kg (including all taxes) from Friday's closing level of Rs 2,65,500 per kg.
Gold of 99.9 per cent purity extended the losses for the third consecutive day, depreciating by Rs 2,950, or 1.81 per cent, to Rs 1,60,250 per 10 grams (including all taxes).
Traders attributed the fall in bullion prices to profit-booking and a shift in demand for safe-haven assets towards the US dollar and bonds, amid rising crude oil prices due to geopolitical tensions in West Asia.
"Gold prices are currently falling due to a significant unwinding of positions, triggered by the surge in crude oil prices. We are seeing a distinct shift in demand for safe-haven assets, while investors are moving capital away from precious metals and into the US Dollar and bonds," Dilip Parmar, Senior Research Analyst, HDFC Securities, said.
He added that this transition is driven by expectations that global central banks will pause interest rate adjustments to combat the inflationary impact of energy supply disruptions stemming from the US-Iran conflict.
Parmar noted that gold and silver in the domestic market are showing clear signs of exhaustion as crowded trades unwind ahead of the financial year-end.
In the international market, bullion prices also traded lower, reflecting similar trends, with spot gold slipping below the USD 5,000 per ounce level, while silver fell below the USD 80 per ounce.
The yellow metal fell by USD 20.94, or 0.42 per cent, to trade at USD 4,998.31 per ounce, while silver fell USD 1.81, or 2.25 per cent, to USD 78.76 per ounce.
Gold is trading at a loss at around USD 4,992 per ounce in overseas trade, as a stronger US dollar weighed on prices, after expectations of near-term rate cuts by the Federal Reserve faded amid rising inflation concerns driven by elevated energy prices, Praveen Singh, Research Analyst, Mirae Asset ShareKhan, said.
Kaynat Chainwala, AVP Commodity Research, Kotak Securities, said that bullion prices may remain soft in the near term, with sharp movements unlikely in the absence of a significant shift in the geopolitical or policy outlook.
She added that traders are focusing on the upcoming Federal Open Market Committee's policy meeting for updated economic projections to gain insights into the policy outlook, as the Fed is widely expected to maintain the status quo on rates.
"On the data front, the US Producer Price Index (PPI) and weekly jobless claims will be in focus for signals on the health of the broader economy," she said.
"Having said that, with no signs of de-escalation in the ongoing US-Iran standoff, geopolitical risk remains the dominant market driver in the near term," Chainwala said.