Gold, silver prices crash ahead of Diwali: Why precious metals are falling

Gold and silver prices have taken a dramatic turn right before Dhanteras and Diwali, ending an extraordinary rally in 2026. International gold has fallen nearly 30 per cent from its January record of USD 5,595 an ounce, while silver has experienced an even sharper correction.

The domestic impact reached acute levels when "MCX gold fell by 4,206 rupees per 10 grams, while MCX silver crashed by almost 10,000 rupees per kilogram" in a single day on October 30. This sudden reversal has left millions of Indian families preparing for festive purchases wondering why prices are dropping despite high global uncertainty.

Also read: Gold or silver: What should you buy now? How do you decide?

A major trigger behind the drop is rising crude oil prices, which have intensified fears that global inflation will remain higher for longer. Consequently, markets are speculating that the US Federal Reserve will have less room to cut interest rates and might even consider further rate hikes.

Rate hike fears

Interest rate expectations heavily influence precious metals, as the market analysis notes, "gold doesn't pay interest." When bond yields and fixed-income investments become more attractive, capital moves away from non-yielding assets, placing significant downward pressure on gold.

Compounding the decline, technology stocks suffered a severe sell-off on October 30 over concerns that massive artificial intelligence investments may not yield adequate returns. When equity markets drop, investors frequently sell safe-haven assets like gold and silver "simply to raise cash or meet margin requirements on borrowed positions."

Also read: Expect gold prices to rise over the next couple of months: Economist

Silver faces additional vulnerability because it is "not just an investment metal," but also a key industrial component used in solar panels, electronics, and manufacturing. Worries over broader economic growth hit industrial demand hard, causing silver's corrections to be "much more brutal" due to its higher volatility.

Festive buying outlook

For Indian jewellery shoppers ahead of Diwali, falling prices offer welcome relief after months of expensive gold and silver. However, buyers are advised not to confuse a price correction with a guaranteed discount, as final domestic prices also depend on "the rupee-dollar exchange rate, import duties, taxes and jewellery making charges."

For investors, gold could recover if interest-rate expectations soften, the US dollar weakens, or investment demand returns. Conversely, if persistent inflation keeps interest rates elevated, prices could remain under sustained pressure.

Ultimately, while precious metals have not suddenly become worthless, recent market behaviour demonstrates that even powerful rallies can end in sharp downturns. For those buying or investing ahead of Diwali, the key takeaway remains: "A falling price is not necessarily a cheap price."