Gold prices witnessed a sharp decline in Chennai today, following a fall in international markets driven by the strengthening of the US dollar and rising investor expectations that the US Federal Reserve may increase interest rates.

The US dollar has climbed to its highest level in the past year, making gold more expensive for buyers using other currencies and thereby reducing global demand for the precious metal. As a result, gold prices dropped significantly in both international and Indian markets. In Chennai, the price of ornamental gold fell by ₹1,680 per sovereign in a single day.

In the international market, spot gold fell to $4,082 per ounce, while gold futures for August delivery were trading at $4,096 per ounce.

Although crude oil prices declined due to progress in peace talks between the United States and Iran, the fall in oil prices did not support gold prices. Earlier, gold had been moving in response to developments in the Middle East, but the focus has now shifted to the upcoming decision of the US Federal Reserve.

A key reason behind the latest decline is the growing expectation that the Federal Reserve may raise interest rates to control inflation. Federal Reserve official Kevin Warsh has hinted at the possibility of a rate hike. According to market estimates, the probability of a rate increase at the Fed’s upcoming December meeting has risen to 86 percent, up from 61 percent before last week’s Fed meeting.

Gold is generally considered a safe-haven asset during periods of inflation and economic uncertainty. However, in a high-interest-rate environment, investors often reduce their exposure to gold, as rising rates make interest-bearing assets more attractive.

Meanwhile, following initial geopolitical talks between the US and Iran, the US has temporarily eased certain sanctions on Iran for 60 days. Although tensions continue in Lebanon, the negotiations are said to be progressing positively. Shipping traffic through the Strait of Hormuz has also returned to normal, resulting in a decline in Brent crude oil prices.

Gold prices had already started to soften yesterday. In Chennai, the price of 22-carat gold fell by ₹40 per gram to ₹13,560, while the price per sovereign dropped by ₹320 to ₹1,08,480.

Today, the decline became steeper. The price of ornamental gold in Chennai dropped by ₹1,680 per sovereign to ₹1,06,800, while the price per gram fell by ₹210 to ₹13,350.

Silver prices also declined in the Chennai market. The price of silver fell by ₹10 per gram, bringing it down to ₹240 per gram.