Gold rises as crude oil prices stoke inflation fears
What's the story
Gold prices in global markets witnessed an increase on May 5, while silver saw a minor dip. The movement is being attributed to high crude oil prices and geopolitical tensions. On COMEX, gold was trading at $4,546.80 per ounce after gaining $13.5 or 0.3%. Meanwhile, silver was priced at $73.30 per ounce after losing $0.22 or 0.3%.
Oil market
Crude oil prices remain elevated amid West Asia tensions
Crude oil prices remained elevated, with Brent crude hovering around $114 per barrel and West Texas Intermediate trading below $105 per barrel. The rise follows heightened tensions in West Asia, including renewed US-Iran hostilities and disruptions near the Strait of Hormuz, a major global oil transit route.
Market impact
Impact of rising energy costs on precious metals
Analysts believe that high crude prices are fueling inflation fears and could keep interest rates higher for longer, putting pressure on non-yielding assets like gold and silver. Kaynat Chainwala, AVP-Commodity Research at Kotak Securities, said rising energy costs could force central banks to maintain a hawkish stance, limiting upside potential in precious metals.
Market volatility
Fed's hawkish stance and its effect on bullion prices
Chainwala also observed that both gold and silver had recently slipped to near one-month lows amid a hawkish US Federal Reserve outlook, with rate cuts being priced out in the near term. However, she noted occasional recoveries driven by diplomatic signals and short-covering. Prithviraj Kothari, MD at RiddiSiddhi Bullions Ltd., echoed similar sentiments about a hawkish Fed-oil-inflation feedback loop weighing on bullion despite ongoing geopolitical risks.
Inflation impact
Central bank buying continues to support gold prices
Kothari also highlighted that the near-closure of the Strait of Hormuz has fueled inflation fears, which paradoxically pressured gold despite elevated geopolitical tensions. He added that structural factors such as central bank buying and ETF inflows continue to support prices. Analysts expect gold to trade between $4,500-$4,850 per ounce in the near term while silver could range between $71 and $80 per ounce amid evolving geopolitical and macroeconomic cues.