Gold prices dip in Sri Lanka

• The price of a 24-carat gold sovereign fell from Rs. 408,000 on March 17 to Rs. 370,000 on March 24, while a 22-carat sovereign dropped from Rs. 375,300 to Rs. 340,400

By Charithya Kumarasiri   

Gold prices in Sri Lanka have declined this week, reflecting falls in international markets. The drop comes after a period of historically high gold prices earlier this year, driven by geopolitical tensions, rising inflation, and global economic pressures.   

According to the Sri Lanka Gem and Jewellery Association, the price of a 24-carat gold sovereign fell from Rs. 408,000 on March 17 to Rs. 370,000 on March 24, while a 22-carat sovereign dropped from Rs. 375,300 to Rs. 340,400 over the same period.. 

In early 2026, gold had already been trading at historically high levels, reaching around USD 5,600 per ounce in late January. Some forecasts at the time had even projected a potential rise toward USD 6,000. When the conflict between the United States and Iran escalated, gold prices were fluctuating between USD 5,000 and USD 5,200 per ounce.   

Despite expectations of further gains amidst the crisis, the upward momentum has weakened in recent weeks. According to the Sri Lanka Gem and Jewellery Association (SLGJA), gold fell to approximately USD 4,100 per ounce on March 23, before recovering slightly to USD 4,300 on March 24, possibly due to a temporary five-day pause in hostilities in the Middle East.   

The recent drop in gold prices is linked to rising global inflation, particularly in the United States, which has limited the Federal Reserve’s ability to cut interest rates. While lower interest rates typically stimulate economic growth and support gold prices, sustained inflation has forced policymakers to maintain higher rates, reducing gold’s attractiveness.   

Speaking to Daily Mirror, Sellakumar Kandasamy, Head of the Jewellery Segment of the SLGJA, explained that gold is a non-yielding asset, meaning it does not generate regular income such as interest. He said that gold only yields a profit if its price rises, and it is sold.   

Kandasamy said that the decline in gold has been exacerbated by weakening stock markets. He elaborated that many investors rely on borrowed or leveraged capital, and when equities fall, they are compelled to liquidate assets, including gold, to cover losses and meet margin calls. This forced selling, combined with the inability to lower interest rates due to inflation, has accelerated the decline in gold prices.