Gold Heads for Sharpest Weekly Drop Since June on Higher-for-Longer Fed Rate Expectations

Gold prices eased Friday and were poised for their sharpest weekly decline in more than four months, pressured by surging oil prices and strong U.S. economic data that strengthened the case for the Federal Reserve to maintain higher interest rates.

Spot gold was down 0.1% at $4,018.69 per ounce by early Asian trade, touching its lowest level since August 3, according to market data. U.S. gold futures for December delivery fell 0.6% to $4,033.70. For the week, the metal has lost about 3.5%, its biggest weekly decline since June.

The drop has extended to a second consecutive week. Spot gold earlier hit $3,986.50, its lowest since July 20, as reported by Economic Times.

Oil prices rose about 4% to a five-month high after Houthi attacks in Saudi Arabia stoked supply disruption fears. Higher energy prices stoke inflation expectations and bolster the outlook for higher-for-longer interest rates, increasing the opportunity cost of holding non-yielding bullion.

U.S. jobless claims fell to near 57-year lows last week, suggesting a modest pickup in job growth in October, according to Economic Times. The data reinforced expectations that the Fed will keep rates elevated.

Markets now see as low as a 7% to 9% chance of a rate hike at the Fed’s October 27-28 policy meeting, while expectations for a December hike remain at 81%, based on CME’s FedWatch Tool. Investors are also awaiting U.S. Personal Consumption Expenditures data, the Fed’s preferred inflation gauge, due next week.

“The rise in oil prices could result in real interest rates remaining higher for longer, which would reduce the relative attractiveness of investing in and holding gold,” Hamad Hussain, climate and commodities economist at Capital Economics, told Economic Times.

**Precious metals complex under pressure**

The sell-off has extended across other precious metals. Spot silver edged 0.1% lower to $54.46 per ounce, after earlier sliding 1.2% to $53.8882 — its lowest since November 2025, as reported by Economic Times. Spot platinum fell 0.8% to $1,557.03, its lowest since July, while palladium dropped 0.5% to $1,051.00, its lowest since June 2025. All three metals are headed for weekly declines.

Silver is facing additional pressure from concerns over industrial demand and global economic growth. MCX December silver futures in India crashed 3.5% on Friday to Rs 1,92,800 per kg, with the metal down nearly 55% from its record high earlier this year.

“Silver ETFs were declining sharply in line with international prices amid profit-booking, rising inflation concerns and expectations of higher-for-longer US interest rates,” said Nirpendra Yadav, senior research analyst at Bonanza, as quoted by Economic Times.

HSBC cut its average 2026 platinum and palladium price forecasts in a research note Thursday, citing shifting market fundamentals and investor liquidation, Economic Times reported.

**India silver import permits weigh on domestic premiums**

India has issued permits to import around 6,500 metric tons of silver over the next six months, four bullion dealers told Reuters, as reported by Economic Times and NDTV Profit. The world’s biggest consumer of the precious metal is seeking to meet festive-season demand. India relies on international purchases for more than 80% of its silver needs.

The government had restricted silver imports sharply in mid-May, tightening rules further in June. The new permits surprised market participants given weak demand for silver jewellery and investment amid falling prices, dealers said, as reported by Economic Times.

Chirag Thakkar, chief executive of leading silver importer Amrapali Group Gujarat, told Economic Times the permitted volume appeared substantially higher than likely demand over the next six months, and expected additional supply to help bring down domestic premiums.

**Outlook remains bearish**

In the domestic futures market, MCX gold prices fell below Rs 1,42,000 per 10 grams for the first time in ten trading sessions, declining 6.4% or Rs 9,693 over that period. The rupee’s 0.4% decline on Thursday to around 94.82 against the dollar has provided a partial cushion to domestic gold prices, NDTV Profit reported.

Technical indicators signal continued weakness. The relative strength index on domestic gold is near 32, approaching oversold territory, while a negative MACD histogram suggests strong downward momentum, according to NDTV Profit. Analysts noted that the Rs 1,40,000 to Rs 1,41,000 range is a key support band; a decisive break below could push prices toward the next support of Rs 1,37,500 to Rs 1,38,300.

“Gold is now caught between global conflict fears and high interest rates, while silver is taking a bigger hit as elevated borrowing costs also weigh on industrial demand,” Rajeev Sharan, head of research at Brickwork Ratings, told Economic Times.

In China, bullion traded at premiums of $9 to $10 an ounce to the global benchmark, though the country’s jewellery market remains weak due to low consumer confidence, Rhona O’Connell, head of market analysis at Stone X, told Economic Times. China’s gold jewellery demand recorded its weakest first-half demand in tonnage terms since 2006, according to a recent World Gold Council report.