Silver hits 11-month low of ₹1.95 lakh as crude stokes inflation fears

Kolkata: Silver prices have plunged to an 11-month low, falling more than 53% from their record high of ₹420,048 per kg on January 29, as surging crude oil prices rekindle inflation fears and expectations of higher interest rates dampen the appeal of precious metals. Gold, too, is under pressure, having declined more than 20% from its peak this year, as investors reassess their exposure to non-yielding assets.

On the Multi Commodity Exchange (MCX), silver futures fell ₹6,799 per kg, or 3.4%, to ₹1,92,800 per kg on Friday. Prices have plunged ₹32,955, or more than 14%, over the past 10 sessions. A recent appreciation in the rupee has provided only limited relief against the decline in international prices.

Gold has also witnessed a sharp slide. In the international market, spot prices have fallen more than 3.5% to around $4,015 an ounce, their lowest since July 20, with Thursday alone seeing a 2.8% drop. On the MCX, gold futures slipped below ₹1.42 lakh per 10 grams on Friday, down more than 20% from this year's peak of ₹1.81 lakh per 10 gm in January.


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In Mumbai's spot market, silver was trading at ₹1.95 lakh per kg, down from ₹2 lakh per kg on Thursday. Gold, on the other hand, was trading at ₹1.41 lakh per gm, down from ₹1.43 lakh per 10 gm on Thursday.

"Oil is driving this selloff more than fear is," said Aditya Agarwala,chief investment officer, InvestValue. Brent crude above $110 a barrel, amid fresh supply risks in the Gulf, has revived inflation concerns. Also, markets are now anticipating another US Federal Reserve rate hike before the year-end.

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Higher interest rates weigh on gold and silver as they do not generate interest income, making yield-bearing assets more attractive. Silver is also facing concerns over industrial demand, with weakness in solar-panel manufacturing in China and demand from chip-making industry amid the technology-sector sell-off adding to the pressure.