Gold, silver prices seeing a decline today: What's the reason?
What's the story
Gold and silver prices witnessed a decline on the Multi Commodity Exchange (MCX) today. The fall comes amid rising oil prices due to renewed US-Iran tensions, raising inflation fears and increasing the likelihood of a US Federal Reserve rate hike. August futures for MCX gold were trading at ₹1,43,583 per 10g, down 0.40%, while September contracts for MCX silver were priced at ₹2,22,899 per kg, 0.26% lower than before.
Market reaction
US-Iran tensions impact global markets
The recent military strikes between the US and Iran have significantly impacted global markets. The US military launched attacks on Iran in retaliation for alleged drone strikes on vessels near the Strait of Hormuz. Despite these developments, a senior US official told Axios that both countries have agreed to de-escalate and cease hostilities. Meanwhile, oil prices surged with Brent crude trading above $72 per barrel.
Economic indicators
Dollar index remains high
The dollar index remained high on the prospect of Federal Reserve rate hikes, putting further pressure on gold prices. The dollar is expected to post its biggest monthly gain in nearly a year in June, as the US-Iran conflict fuels expectations of interest rate hikes and safe-haven demand. According to the CME FedWatch Tool cited by Reuters, traders expect up to three Fed rate hikes this year.
Future projections
Experts predict further declines in gold and silver prices
Jigar Trivedi, Senior Research Analyst at IndusInd Securities, expects MCX gold August futures to fall to ₹1,43,800 per 10g amid weak global sentiment. He said, "Gold prices declined as fresh exchanges of attacks between the US and Iran over the Strait of Hormuz lifted oil prices and rekindled inflation concerns." Manoj Kumar Jain from Prithvifinmart Commodity Research also predicts further declines in both gold and silver prices.