Gold, Silver Face Volatility Amid US-Iran Tensions, Crude Oil Spike: Analysts

Fresh escalation in the US-Iran conflict is expected to keep gold and silver prices volatile in the coming week, with investors closely tracking crude oil prices and inflation data that could reshape expectations for global interest rates, according to PTI.

Fresh hostilities in West Asia have once again put markets on edge. The latest round of tensions began after Iran said it had struck a vessel travelling on an unapproved route before announcing the closure of the Strait of Hormuz.

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The US Central Command later said it carried out strikes on Tehran, following which Iran retaliated by targeting American-linked installations in the United Arab Emirates, Kuwait and Bahrain.

Analysts believe any further escalation in the conflict could drive crude oil prices higher, revive inflation concerns and strengthen safe-haven assets such as the US dollar and Treasury yields, limiting the upside for precious metals.

"For gold and silver, momentum remains down and corrective. Focus will again turn back on the US-Iran conflict. Any big escalation would again push oil prices higher and strengthen safe-haven assets like the US dollar and Treasury bond yields," Pranav Mer, Senior Vice President, EBG - Commodity & Currency Research at JM Financial Services Ltd., told PTI.

Apart from geopolitical developments, markets will closely watch inflation data from India, the European Union and the United States for fresh clues on the monetary policy trajectory of major global central banks, he said.

On the domestic front, MCX gold futures for August delivery declined by Rs 3,900, or 2.65%, during the week to settle at Rs 1.43 lakh per 10 grams.

Silver futures for September delivery also dropped Rs 14,746, or 6.2%, to settle at Rs 2.22 lakh per kilogram.

"Gold witnessed another subdued week, declining more than 2 per cent, as a combination of a stronger US dollar, firm crude oil prices, and expectations of higher interest rates continued to weigh on investor sentiment," Jateen Trivedi, VP Research Analyst, Commodity and Currency at LKP Securities, told PTI.

Despite intermittent recovery attempts, bullion failed to sustain gains, with every rally attracting fresh profit booking, he said.

"The Indian rupee also witnessed a mild correction, which offered limited support to MCX gold. However, the impact of currency weakness was largely offset by bearish global sentiment, resulting in gold continuing its corrective phase," he added.

In international markets, Comex gold futures slipped USD 12, or 0.3%, to settle at USD 4,113.7 per ounce in New York, while silver fell 1.5% to USD 60.16 per ounce.

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Looking ahead, analysts said investors will closely monitor key US economic indicators, including retail sales, housing data and weekly jobless claims, for fresh clues on the US Federal Reserve's interest rate trajectory.

Chinese economic indicators, including GDP growth, industrial production, fixed asset investment, bank lending and trade data, will also remain in focus as they could influence the outlook for industrial metals, which have shown signs of recovery over the past few sessions, Mer said.

According to Trivedi, bullion prices have repeatedly failed to sustain gains, reflecting a cautious market where investors continue to use rallies to book profits rather than initiate fresh long positions.

"Unless there is a significant shift in geopolitical developments or macroeconomic indicators, the sentiment remains cautious until stronger fundamental triggers emerge," he said.

(With PTI inputs.)

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