Gold prices in Chennai continued their downward trajectory on Thursday, with the eight-gram sovereign slipping to ₹1,08,000, bringing the psychologically significant ₹1 lakh level back into focus. The decline comes as global bullion attempts a tepid recovery from a six-month low, but persistent concerns over U.S. inflation and potential Federal Reserve rate hikes are capping any significant upside.
Local Market Details
The Jewellers and Diamond Trader’s Association, Madras, reported 22-carat gold at ₹13,500 per gram on Thursday, down from ₹13,600 on Wednesday. Silver remained steady at ₹260 per gram. Data from BankBazaar showed a sharp decline over the past few days: the 22-carat sovereign stood at ₹1,13,600 on June 9, fell to ₹1,10,400 on June 10, and dropped further to ₹1,08,000 on June 11. A sovereign, also known as pavun, weighs eight grams.
Global Gold Market
Internationally, spot gold rose 0.6% to $4,097.01 per ounce by 0836 GMT, after earlier hitting its lowest level since November 21. U.S. gold futures for August fell 0.4% to $4,118. Independent analyst Ross Norman described gold as “significantly oversold,” questioning whether the bounce was a genuine recovery or merely short-covering by traders. Matt Simpson, senior analyst at StoneX, noted that $4,000 is emerging as a clear support zone, with bears potentially taking profits or fresh buyers stepping in.
Inflation and Fed Rate Concerns
The latest U.S. inflation data has reignited fears of further monetary tightening. The Consumer Price Index (CPI) rose 0.5% in May and was up 4.2% year-over-year, with energy costs accounting for over 60% of the monthly increase. Heather Long, chief economist at Navy Federal Credit Union, said inflation is squeezing American households. Scott Anderson of BMO Capital Markets warned that “future rate hikes” remain possible if energy prices stay elevated. According to the CME FedWatch tool, fed-funds futures now imply a 67% probability of a rate hike by December.
Commerzbank’s Carsten Fritsch noted that traders are pricing in a Fed rate increase before year-end, but suggested gold might “start to recover” if the upcoming Fed meeting does not signal a hawkish tilt. The market is also awaiting the May Producer Price Index (PPI) release, which could further influence expectations.
Domestic Futures and Market Context
On the Multi Commodity Exchange (MCX), gold futures for August delivery traded near ₹147,400 per 10 grams as of 2:52 p.m. IST, down 0.42%, with a day’s low of ₹146,444. The domestic market is also being impacted by a weaker rupee, which typically cushions gold prices as imports become more expensive. The rupee weakened on Thursday due to dollar buying by oil companies and ongoing Middle East tensions. Brent crude oil touched $95.50 per barrel.
Other precious metals showed mixed performance. Spot silver rose 1.3% to $64.49 per ounce, platinum added 0.8%, and palladium jumped 3%. In Chennai, retail silver remained steady at ₹260 per gram.
Outlook
The interplay between global economic data, Fed policy expectations, and local demand continues to drive gold markets. If PPI data comes in hot, oil prices rise further, or the dollar strengthens, gold could slip back toward $4,000, which would likely drag Chennai prices lower. Conversely, any dovish signals from the Fed could provide a much-needed boost. For now, the market remains in a tug-of-war between safe-haven demand and the allure of higher-yielding assets.
