Gold fell 5.1% in September, its worst month since June

By Strota Newsroom · 2026-10-05 · How Strota reports

Gold in India ended September at 147888 rupees per 10 grams, against 155835 rupees on the last day of August. That is a fall of 5.1 per cent in a month that carried the three things households buy gold against: a fresh escalation in the Gulf, oil prices staying high, and a United States Federal Reserve that raised interest rates for the first time since 2023.

The metal is bought as protection. In September it did not behave like protection, and working out why is the most useful thing a household can take from the month, because the reason sits in American bond yields rather than in the Gulf.

Start with what the month actually held. The Fed raised rates by a quarter of a percentage point, its first increase since 2023, and signalled that more tightening may be needed. The yield on the longest-dated US Treasury bond rose for a sixth straight day to the highest since 2002. Traders were pricing a 68 per cent probability of another increase at the Fed's October meeting by the end of the month.

Gold pays no interest. When the yield on a government bond rises, the cost of holding an asset that pays nothing rises with it, and money that would have sat in bullion has somewhere else to go. That is the mechanism that beat the war bid this time.

The dollar did the rest, and the two effects work in the same direction. Gold is priced in dollars worldwide, so a stronger dollar makes it more expensive for every buyer holding another currency, and demand softens. India Bullion and Jewellers Association data, which is the price a jeweller in Mumbai actually quotes against, shows the metal falling from 152113 rupees per 10 grams on 25 September to 147888 rupees on 30 September. Silver fell from 232350 rupees a kilogram to 220435 rupees over the same four sessions, a drop of 5.1 per cent against gold's 2.8 per cent.

Silver is where the month gets more interesting. It fell 7.1 per cent over September, from 237199 rupees a kilogram to 220435 rupees, well past gold's 5.1 per cent. Silver carries an industrial demand that gold does not, so it takes its cue from growth expectations as well as from interest rates, and it moves harder in both directions.

The international market was blunter than the Indian one. Comex gold fell more than 6 per cent over the month, its worst loss since June, while the Mumbai price fell 5.1 per cent. The gap is the rupee. As the currency weakened against the dollar through September, the same ounce converted into more rupees, cushioning the fall for an Indian buyer. The same dollar move that hurt gold's dollar price helped the rupee price of it.

That cushion is worth understanding before treating a fall in the international price as the fall you will see at the counter. Two households held the same metal: one bought in dollars and one bought in rupees, and the rupee buyer lost roughly a percentage point less.

The other buyer that has supported this market for three years also stepped back. Holdings in the SPDR Gold ETF stood at 1057.41 tonnes on 1 October, down 1.42 tonnes in a day. Central bank purchases, the structural bid that carried gold through 2022 and 2023, have lost momentum, which leaves the price more exposed to whatever the rates market does next.

The clearest sign that macro forces are now driving both metals is the relationship between them. The gold silver ratio sat at 69.13 on 1 October, and the range it travelled inside over the quarter had narrowed to about 7 points, against a ten-year average of roughly 18. The 30 day correlation between the two metals is around 0.94, close to the ceiling. Gold and silver are currently trading as one macro position rather than as two separate markets with separate fundamentals.

That is why Monday looked strange at the opening bell. MCX gold for November delivery was at 148129 rupees per 10 grams, down 0.62 per cent, while MCX silver for December was up 0.23 per cent at 226393 rupees a kilogram. The two metals moved in opposite directions in the same session, which is unusual when their correlation is this high.

At the retail counter the numbers a buyer sees are higher than the exchange price, and always have been. Twenty-four carat gold was quoted at 149540 rupees per 10 grams in Mumbai on Monday, 22 carat at 137078 rupees, and silver 999 fine at 226770 rupees a kilogram, according to IBA data. Delhi quoted 24 karat at 149010 rupees, 22 karat at 136593 rupees and silver at 225970 rupees a kilogram. Making charges and GST sit on top of those figures, which is why the bill rarely matches the headline rate.

What the month does not establish is direction. The festive and wedding season is now beginning, and dealers expect it to support physical demand, but that is an expectation about buying, not a forecast about price. A household that bought gold in early September is down, and a household that bought it a year ago is up, and both are true in the same market at the same time.

The one thing September settled is that the old rule of thumb, that a war lifts gold, is conditional. When the escalation arrives alongside a central bank raising rates and long bond yields at their highest since 2002, gold can fall through a month of exactly the news its buyers were hedging against.

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