Gold and silver prices witnessed a steep decline on Friday as multiple global and domestic factors triggered heavy selling across precious metals. From stronger US inflation data and rising Treasury yields to India’s tighter import rules, the bullion market faced pressure on several fronts simultaneously.

On the Multi Commodity Exchange (MCX), gold futures for June delivery fell Rs 2,880, or 1.78%, to Rs 1,59,098 per 10 grams, while the actively traded contract later hovered near Rs 1,58,872 per 10 grams, down around 2% during the session. Silver also saw sharp losses, with MCX silver futures falling nearly 6% to Rs 2,73,601 per kg, while intraday declines approached 9%.

Retail bullion prices, however, remained elevated. 22-carat gold was priced at Rs 14,950 per gram, 18-carat gold at Rs 12,470 per gram, while silver traded at Rs 305 per gram.

Here are five major reasons behind the sharp correction:

1. Strong US inflation 

The biggest trigger came from fresh inflation data in the United States.

US consumer inflation rose to 3.8% in April, its highest level since May 2023, while producer prices also accelerated sharply. Analysts said higher energy costs have started feeding into broader inflation.

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This has significantly weakened expectations that the US Federal Reserve will cut interest rates anytime soon. According to CME Group's FedWatch data, expectations for near-term policy easing have largely faded.

Gold generally benefits from lower interest rates because it does not provide regular income. When rate cuts appear unlikely, investor interest in bullion often weakens.

2. Rising bond yields

US Treasury yields moved sharply higher after inflation data surprised markets.

The benchmark 10-year US Treasury yield climbed close to one-year highs, increasing the opportunity cost of holding assets like gold and silver.

Unlike bonds or deposits, precious metals do not generate interest income. Higher yields therefore make fixed-income assets relatively more attractive, leading investors to reduce exposure to bullion.

Analysts noted that rising yields contributed significantly to the weakness across precious metals.

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3. Stronger dollar

The US dollar strengthened as investors adjusted expectations around future monetary policy.

Because gold is priced globally in dollars, a stronger greenback generally makes precious metals more expensive for overseas buyers. This often results in weaker demand and lower prices.

Kaynat Chainwala, Assistant Vice-President of Commodity Research at Kotak Securities, said hotter-than-expected inflation and a stronger dollar stripped momentum from both metals.

4. Gold import rules

Domestic policy measures also created fresh headwinds.

India recently increased gold and silver import duties to nearly 15% from around 6% in an effort to reduce imports and support foreign exchange reserves.

In addition, the government introduced a 100 kg cap on duty-free gold imports for jewellery exporters.

Analysts believe the move may reduce arbitrage opportunities and curb imports, but it could also affect jewellery demand in one of the world's largest bullion-consuming markets.

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India, the world’s second-largest gold consumer after China, relies heavily on imports to satisfy demand from its jewellery industry. These imports contribute to a substantial outflow of foreign exchange.  Under the revised duty structure announced on Wednesday, the government raised the basic customs duty on gold to 10%, doubling the previous rate, while the Agriculture Infrastructure and Development Cess (AIDC) was increased fivefold from 1% to 5%.

This has pushed the effective import duty on both gold and silver to 15%. Additionally, importers must pay a 3% Integrated GST (IGST), taking the overall tax burden to 18.45%, up sharply from 9.18% earlier.

India’s gold imports rose over 24% in FY2025-26 to a record USD 71.98 billion. However, import volumes declined 4.76% year-on-year to 721.03 tonnes, indicating higher import values were driven largely by rising gold prices.

5. Crude prices and geopolitical risks

Crude oil prices remained elevated amid continued concerns surrounding the Strait of Hormuz, a critical global energy route.

Brent crude traded near $109 per barrel, while WTI hovered around $105. Higher oil prices have intensified inflation concerns and reduced expectations of monetary easing.

Markets are also closely tracking developments from Donald Trump’s discussions with Chinese President Xi Jinping, with investors watching for signals around trade, Iran and global geopolitical risks.

Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities, said: “Gold prices felt the heat as MCX Gold corrected sharply by nearly ₹3,000 to ₹1,59,070, pressured by a rise in crude oil prices and a stronger dollar index, which weighed on bullion sentiment. Profit booking also emerged after the steep rally and elevated levels witnessed in recent sessions. For the short term, gold support is seen near ₹1,54,000 while resistance remains around ₹1,62,000. Markets will closely track updates from the US-China meeting, Trump’s policy stance after returning to the US, and ongoing geopolitical tensions involving the US, Israel, and Iran."

For now, analysts believe inflation data, policy actions and global developments will continue driving near-term movements in gold and silver prices.