Why are gold and silver prices falling? How oil prices, US interest rates are driving the decline

Gold and silver prices are falling as higher oil prices, US Treasury yields and a stronger dollar raise concerns over further Fed rate hikes.

Gold and silverprices have come under pressure in India after a sharp fall in global bullion markets, as rising crude oil prices, higher US Treasury yields and a stronger dollar weighed on precious metals.

Gold steadied on Tuesday but remained near its seven-week low as investors assessed the possibility of US interest rates staying higher for longer. (Reuters) (Representative Image)

Gold and silver exchange-traded funds (ETFs) also declined on Monday, September 28, tracking losses in global markets. Silver ETFs fell as much as 4%, while gold ETFs dropped more than 2%.

In the domestic commodity market, MCX silver futures for September 2026 delivery fell ₹6,661 to ₹2,28,035 per kg, while October gold futures declined ₹3,214 to ₹1,47,667 per 10 grams, according to a Livemint report.

The fall in domestic prices mirrored a sharp decline in international markets. So, what is driving gold and silver lower?

Why are gold and silver prices falling?

Gold fell about 4% on Monday to a more than seven-week low, while spot silver dropped 4.5%, according to Reuters.

Spot gold fell as low as $4,110.55 an ounce, its lowest level since August 5. Prices steadied on Tuesday but remained close to the seven-week low as investors weighed the possibility of US interest rates remaining higher for longer.

The ongoing US-Iran conflict has kept concerns about disruptions to global oil supplies elevated, particularly around the Strait of Hormuz.

Oil prices rose for a second consecutive session on Tuesday amid concerns over Middle East supply disruptions. Crude climbed towards $110 a barrel after recent US-Iran talks failed to produce a breakthrough on reopening the Strait of Hormuz.

Higher oil prices can increase costs across the economy and add to inflationary pressures. That, in turn, can strengthen expectations that central banks will keep interest rates elevated or raise them further to contain inflation.

These expectations have put additional pressure on gold and other precious metals.

Why do higher interest rates hurt gold?

Unlike bonds and some other financial assets, gold does not pay interest. When interest rates and bond yields rise, interest-bearing assets become relatively more attractive to investors.

US Treasury yields rose during Monday's sell-off in gold. Higher yields increase the opportunity cost of holding non-yielding assets such as gold.

The US Federal Reserve raised its benchmark interest rate by 25 basis points earlier this month and indicated that further increases could be possible.

Markets are currently pricing in a 70.3% probability of another Fed rate hike in October, according to the CME FedWatch Tool.

Bloomberg reported that gold has fallen about 7% in September following the Fed's rate increase and signals that further hikes could be on the table.

Why is silver falling too?

Silver has also been caught in the broader sell-off in precious metals.

Spot silver fell 4.5% to $61.39 an ounce on Monday, according to Reuters, before slipping another 0.6% on Tuesday to $60.62 an ounce.

In India, silver ETFs and MCX futures also came under pressure. Silver ETFs fell as much as 4% on Monday, while MCX silver futures for September 2026 delivery declined ₹6,661 to ₹2,28,035 per kg, according to Livemint.

Like gold, silver is affected by higher US Treasury yields and a stronger dollar. But silver also has significant industrial uses, meaning expectations about global economic growth and industrial demand can influence its price.

Doesn't war usually push gold prices higher?

Gold is traditionally viewed as a safe-haven asset and often attracts investors during periods of geopolitical uncertainty.

But the current US-Iran conflict is also pushing crude oil prices higher. That has intensified concerns about inflation and increased expectations that interest rates could remain elevated or rise further.

For now, the pressure from higher yields, interest-rate expectations and a stronger dollar is weighing on gold despite geopolitical tensions.

What are markets watching now?

Investors are now awaiting a series of US economic indicators this week for fresh clues on the Federal Reserve's next move.

These include job openings data, the ADP employment report, Personal Consumption Expenditures (PCE) inflation data and nonfarm payrolls.

The figures could shape expectations about the path of US interest rates, which remain a key driver of gold and silver prices.