Global oil prices surge, Kerala gold rates fall: Will sovereign price drop to ₹1 lakh?

Gold prices in Kerala continued a slide for a third consecutive day on Thursday, falling by ₹1,240 per sovereign to ₹1,05,880. The latest decline brought the bullion to its lowest since the first week of August, bringing buyers closer to the ₹1 lakh mark.

The price of a gram of gold fell by ₹155 to ₹13,235, according to the All Kerala Gold and Silver Merchants Association, which sets the daily rates in the state.

Gold has lost ₹5,160 per sovereign since October 10, with the decline accelerating over the past three days. The price has fallen by ₹2,680 during this period alone.

But will the slide continue, taking gold below ₹1 lakh per sovereign? The answer will depend on movements in international bullion prices, the US dollar, interest-rate expectations and the rupee's performance against the dollar.

Oil surge puts pressure on gold
Gold prices have come under pressure in the international market as rising crude oil prices fuel inflation concerns and strengthen expectations that interest rates could remain elevated for longer. Brent crude rose nearly 2.30 per cent to around $111.3 a barrel on Thursday amid escalating tensions in the Middle East, including attacks by Houthi rebels in Saudi Arabia, one of the world's major oil exporters.

Higher energy prices pushed up inflation in many European countries. This has made central banks more cautious about cutting interest rates. Investors are increasingly factoring in the possibility of tighter monetary policy, particularly in the United States. Gold tends to become less attractive when interest rates and bond yields rise, as investors can earn better returns from interest-bearing assets. Expectations of higher US rates can also strengthen the dollar, putting further pressure on bullion prices.

This has helped spot gold rates to fall around 1.3 per cent to $4,085.29 an ounce in the international market. Market participants are also watching the US Federal Reserve's upcoming policy meeting for clues about the direction of interest rates. Traders see little chance of a rate hike at the Fed's October meeting but anticipate a greater possibility of an increase in December. Such expectations have added to the pressure on gold.

Jio IPO and rupee recovery offer relief
Domestic currency movements are another factor influencing gold prices in India.

The rupee strengthened to ₹94.35 against the US dollar on Thursday, compared with its previous close of ₹94.46, extending its recovery despite elevated crude oil prices.

Foreign inflows linked to the proposed Jio Platforms initial public offering (IPO) have supported the rupee. The offering has attracted strong institutional demand, with qualified international buyers bidding 9.42 times their quota.

India imports most of its gold. Since international bullion is priced in dollars, a stronger rupee reduces the cost of importing gold.

At ₹1,05,880 per sovereign in Kerala, gold would need to fall another ₹5,880, or about 5.6%, to reach ₹1 lakh. Whether it crosses that threshold will depend on the direction of international bullion prices, which again is closely tied to global factors including Middle East tensions. The recent decline has brought the milestone closer, but does not guarantee a further fall.

Meanwhile, the price of 18-carat gold fell by ₹135 to ₹10,835 per gram. Silver prices also declined, with a gram falling by ₹5 to ₹225, according to AKGSMA.