- Gold and silver prices may see corrections amid West Asia conflict and central bank meetings
- Investors will watch US-Israel-Iran conflict for market volatility triggers this week
- US Fed, ECB, BoE, and PBoC meetings expected to keep interest rates unchanged
Prices of gold and silver are likely to see more corrective moves this week as investors closely track the escalating war in West Asia and key central bank meetings that could affect the trajectory of the global monetary policy, according to analysts.
Traders will remain focused on the US-Israel-Iran conflict as any signs of escalation or de-escalation could trigger sharp swings across financial markets, the analysts added.
"In the week ahead, focus will remain in the Middle East region as any signs of further escalation or de-escalation may led to increased volatility in the financial markets," Pranav Mer, vice president, EBG - commodity and currency research of JM Financial Services Ltd, said.
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On the macroeconomic front, investors will monitor a raft of key central bank meetings scheduled during the week. The US Federal Reserve will announce its policy decision on Wednesday, followed by the European Central Bank and the Bank of England on Thursday and the People's Bank of China on Friday.
These central banks are widely expected to keep the interest rates unchanged, and market participants will closely analyse their forward guidance for fresh insights on the trajectory of the global monetary policy, Mer said.
Bullion prices in the domestic markets remained under pressure during the past week. On the Multi Commodity Exchange, silver plunged Rs 8,850, or 3.3%, while gold depreciated by Rs 3,168, or 2%.
According to Mer, gold prices broke down from a consolidation range on Friday and ended the week down by nearly 2%, weighed by a stronger US dollar and rising bets that global central banks may delay interest rate cuts amid surging crude oil prices.
He added that the yellow metal prices were down despite a broad sell-off in risk assets like equities, as traders/ investors look to cash in at higher prices or possibly need-based selling like for margin calls, etc.
Despite weakness in prices, bullion continued to remain supported by safe-haven support due to the escalating conflict in West Asia, Mer said.
In the international market, Comex silver slipped nearly $3, or 3.52%, during the last week, while gold declined $97, or 2%.
"Silver prices closed in negative for the second consecutive week, weighed by a stronger dollar and a consolidative/ corrective move in the industrial metals," Mer said.
Vijay Kuppa, chief executive officer of InCred Money, said gold and silver remain key portfolio diversifiers despite short-term volatility.
"Gold and silver earn their place not because of what they return in isolation, but because of how they behave relative to everything else," he said, adding that the metals show low correlation with equities and offer a hedge against currency debasement.
He added that while broader commodity markets have been impacted by disrupted supply chains and shifting trade routes amid the conflict, investors should avoid attempting to time the bullion market and instead maintain a long-term allocation.
(With inputs from PTI)
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