Gold posted its worst week since June, with spot falling 4% to $3,995 and MCX gold down 4% to ₹1.42 lakh. Silver dropped 5.4% to $53.90 and 7.3% on MCX to ₹1.96 lakh. With the dollar and rupee flat, the sell-off came from oil, rates and forced selling. Houthi strikes on Saudi infrastructure pushed Brent above $116, which markets read as inflationary, lifting December hike odds to 78%. Central bank buying and Indian ETF inflows offer support, and Dhanteras and Diwali demand should cushion dips. We favour staggered buying near support ahead of the Fed decision on 28 October.

PRICE PERFORMANCE

Gold just logged its worst week since June. Spot prices fell 4% to $3,995, the first weekly close under $4,000 since mid-July. Silver took a heavier beating, sliding 5.4% to $53.90, its lowest point since November 2025. On MCX, gold futures shed 4% to ₹1.42 lakh, while silver tumbled 7.3% to ₹1.96 lakh.

What stands out is what stayed put. The Dollar Index ended almost flat, and the rupee closed within two paise of its starting level. So this wasn’t a currency story. It was driven by oil, interest rates and forced selling.

MACRO BACKDROP & FED POLICY

Bond markets priced it exactly that way. CME FedWatch put the odds of a hold at the 27–28 October FOMC meeting at 92%, but the probability of a hike by December at 78%. US data only added fuel. The October flash composite PMI eased to 57.6 from 58.4, yet selling-price inflation rose at its quickest pace since August 2022. The final University of Michigan survey showed one-year inflation expectations rising to 4.7% and longer-term expectations to 3.5%, both the highest since May.

With the 10-year Treasury yield sitting around 5.0–5.1%, a metal that pays no interest is a tougher sell. Jim Wyckoff of American Gold Exchange summed it up: central banks may not ease as quickly as they would like, and that works against gold and silver bulls.

 GEOPOLITICAL TENSIONS

The spark came from the Gulf. On Wednesday, 21 October, a Houthi drone intercepted over Saudi Aramco’s Shaybah oilfield scattered debris near a processing plant, killing two people. Hours later, an attack on Dammam’s King Fahd International Airport killed one more, and Washington ordered non-emergency staff and their families out of Saudi Arabia. These strikes followed earlier damage that halted flows on the East-West pipeline, the main route Saudi crude takes to bypass the Strait of Hormuz, plus 28 attacks on shipping in October alone.

Brent climbed from around $110 midweek to above $116 by Friday. Usually, a war premium supports gold. This time, the market read it as an inflation story first: pricier crude means stickier prices, and stickier prices mean a Fed that tightens rather than eases.

CURRENCY MOVEMENT

The Dollar Index held a narrow 101.45–102.08 range and closed at 101.75, down just 0.03%. A firmer dollar did weigh on gold on Monday, but Thursday’s heavy damage came while the greenback was steady. USDINR moved along similar lines. The rupee strengthened to about 94.33 on Thursday, its best level in roughly six weeks, helped by foreign inflows and RBI support. It gave those gains back on Friday as crude rallied and closed at 94.93. With the currency flat, MCX gold tracked COMEX almost one-for-one. For India, the oil import bill remains the rupee’s biggest risk in the weeks ahead.

INVESTMENT AND RETAIL DEMAND

Long-term buyers haven’t gone anywhere. The People’s Bank of China added 21 tonnes in September, its biggest monthly purchase since September 2023 and its 23rd consecutive month of buying, lifting reserves to 2,196 tonnes. World Gold Council data show central banks bought a net 39 tonnes in August, taking 2026 purchases to 170 tonnes, with Poland leading at 98 tonnes year-to-date. This buying won’t stop a correction, but it usually soaks up the dips.

ETF flows tell a split story. Western investors have been trimming, with SPDR Gold Shares seeing about $330 million of outflows in the week to 9 October. Indian investors are doing the opposite: AMFI data show gold ETFs drew ₹4,451 crore in September, up 71% month-on-month, while silver ETFs pulled in ₹1,974 crore.

In India, lower prices ran into festive buying. Dussehra on 20 October brought shoppers back to showrooms, and dealer premiums widened to as much as $9 an ounce over official domestic prices, from $7 a week earlier. Still, the mood is cautious. Industry estimates put Dussehra purchases 7–10% below last year, and old-gold exchange now makes up about half of purchases versus the usual 30%. September gold imports collapsed to $1.8 billion from $9.61 billion a year ago. In China, premiums of $9–10 an ounce point to steady physical appetite.

WEEK AHEAD

It’s a busy week, and the Fed decision is the main event. A hold with hawkish guidance is largely priced in, so a softer tone or a cooler PCE print could spark short covering. Further strikes on Saudi infrastructure remain the wild card.

  • Fed decision: 4.00%, expected to hold. It comes out on 28 Oct at 23:30 IST, and Warsh’s press conference starts at 00:00 IST on Thursday.
  • US Q3 GDP: 3.2% expected, up from 2.2%. It’s out on 29 Oct at 18:00 IST.
  • Core PCE: 0.3% month-on-month expected, up from 0.2%. It comes out at the same time as GDP.
  • ECB decision: the deposit rate is expected to hold at 2.50%, on 29 Oct at 18:45 IST.
  • Bank of Japan: expected to hold at 1.25%, on 30 Oct at 08:30 IST.

TECHNICAL OUTLOOK

Spot gold faces resistance at $4,075, with support at $3,960 and $3,890. Spot silver has support at $52.40 and resistance at $55.80. On MCX, gold support sits at ₹1,40,000–1,39,000 with resistance at ₹1,45,500, while silver has support at ₹1,90,000 and resistance at ₹2,02,000.

The near-term trend is corrective, but steady central bank buying and demand around Dhanteras (6 November) and Diwali (8 November) should cushion the downside. We’d rather buy in stages near support than chase bounces.

Dr. Renisha Chainani, Chief Research Officer (CRO),Augmont