Gold prices are headed for their steepest weekly decline in six weeks, shedding 3.4% in international markets as escalating US-Iran tensions pushed oil prices higher, stoking inflation concerns and reinforcing expectations that the US Federal Reserve could keep interest rates elevated for longer.

The decline in bullion prices, which reflected in domestic gold and silver rates over the past week, however prompted investors to return to the yellow metal and started drawing consumers back to jewellery stores, according to industry executives.

Gold and silver prices have fallen almost 3% and 7%, respectively, this week in international markets. London Bullion Market Association (LBMA) gold spot prices slipped below $4,000 per ounce from $4,111, while LBMA silver spot prices fell below $55 per troy ounce from $59.6.

ET Bureau

"At MCX (India's largest commodity derivatives exchange), the sell-off has been milder due to the rupee depreciating more than 1% against the US dollar," said Renisha Chainani, head of research at Augmont Gold.

"The rupee has come under mounting pressure as crude oil prices resumed their climb following renewed hostilities between the US and Iran. At MCX, gold and silver have fallen by almost 1.5% this week," she added.

On Friday, gold traded at ₹1.41 lakh per 10 grams in India, while silver prices were down to ₹2.16 lakh per kg. The latter was trading at ₹2.17 lakh per kg a week ago.

We have observed a nearly 25% increase in enquiries and store visits in July compared with last month following the recent decline in gold prices. While some consumers continue to watch the market for further corrections, many are choosing not to delay planned purchases, recognising that timing the gold market perfectly is difficult," said Supriya Kataria, founder of Kumari Fine Jewellery.

While some consumers continue to watch the market for further corrections, many are choosing not to delay planned purchases, recognising that timing the gold market perfectly is difficult," said Supriya Kataria, founder of Kumari Fine Jewellery.

Experts said investors are taking advantage of lower gold prices while taking a more cautious approach to silver.

"Not only consumers, but investors as well are looking at gold because the risk-reward ratio at this point appears very favourable. Even if an investor loses 5-7% in the near term, the upside could be much higher once gold prices start climbing again," said Surendra Mehta, national secretary, India Bullion & Jewellers Association.

Portfolio managers are reducing exposure to silver and diversifying into other commodities, according to experts.

"Silver has declined by about 1% over the past week, reflecting a broader shift in investor sentiment. Professional investors are gradually decoupling from silver, which was the preferred momentum trade just a few months ago," said Nilanjan Dey, partner at Wishlist Capital. "Gold, on the other hand, continues to retain its appeal as a core portfolio asset. The recent correction has encouraged strategic buying, particularly through ETFs (exchange-traded funds), as investors view the yellow metal as a long-term hedge despite near-term weakness."

Dey further said, "While expectations of improved equity returns may be influencing some asset allocation decisions, it is too early to call that a trend. Gold remains a smart core holding for most investment portfolios."

Gold ETFs attracted net inflows of Rs 3,443 crore in June, reversing the Rs 725.04 crore net outflow recorded in the previous month, according to data from the Association of Mutual Funds in India.

Investors have turned more circumspect over silver despite record inflows of Rs 4,286 crore into silver ETFs in June after a four-month streak of outflows.