Gold prices extend decline in Kerala; US inflation, ceasefire may drag rates further

Gold prices in Kerala continued to fall after the ceasefire announcement, which ended the 12-day conflict between Israel and Iran brokered by the United States. Gold rates in Kerala declined by ₹680 per sovereign to ₹71,880.

Meanwhile, the price of a gram fell by ₹85 to ₹8,985, after reaching a record high of ₹9,320 earlier this month. This price drop comes as a relief to customers and jewellers alike, who expect the volatility to continue in the coming months. 

The ceasefire agreement between Israel and Iran has significantly contributed to the decline in global gold prices, as the yellow metal is typically seen as a safe-haven investment during periods of economic and political uncertainty.

The price of gold in global markets slipped to $3,296.79 per ounce, according to Reuters.

However, markets are now closely watching the upcoming US inflation data, which could significantly influence gold prices. A Reuters poll has forecast a 0.1 per cent monthly increase and a 2.6 per cent annual rise in the US core personal consumption expenditures (PCE) index.

The US central bank determines its interest rate policy based on inflation data, and a rise in inflation could signal that the Federal Reserve may hold off on changing its current monetary stance. However, markets still expect further rate cuts later this year.

Gold generally performs well in a low-interest-rate environment. When interest rates rise, government bonds and securities become more attractive, prompting investors to shift funds away from gold. The US Fed's interest rate decisions can significantly influence global currency markets, including in India, and have a direct impact on domestic gold prices.

The price of a gram of 18 karat gold dropped by ₹70 to ₹7,405 while silver rates stayed intact at ₹118, according to the All Kerala Gold and Silver Merchants Association (AKGSMA).