Gold and silver prices extended their decline on Thursday, falling over 1% as fresh US-Iran tensions and red-hot US inflation data strengthened the dollar and Treasury yields, according to The Times of India. Silver futures on the Multi Commodity Exchange (MCX) fell for a fifth straight session, dropping Rs 1,705, or 0.72%, to Rs 2,33,800 per kilogram. In international markets, Comex silver futures for July delivery slid 1.48% to USD 63.78 per ounce. Gold prices held nearly steady after touching their lowest level since November, with spot gold little changed at $4,076.88 an ounce, while US gold futures fell 0.9% to $4,097.10.
Price Movements
In the domestic market, gold of 99.9% purity declined for the second consecutive session, falling Rs 2,100 to Rs 1,53,900 per 10 grams in the national capital, according to marketmen. The metal had closed at Rs 1,56,000 per 10 grams on Wednesday. Silver also remained under pressure, with silver futures on MCX moving lower.
| Instrument | Price | Change |
|---|---|---|
| MCX Silver Futures (near month) | Rs 2,33,800/kg | -Rs 1,705 (-0.72%) |
| Comex Silver Futures (July) | USD 63.78/oz | -1.48% |
| Spot Gold | $4,076.88/oz | Little changed |
| US Gold Futures | $4,097.10/oz | -0.9% |
| Domestic Gold (99.9%, Delhi) | Rs 1,53,900/10g | -Rs 2,100 |
Fundamental Drivers
The sell-off was driven by a combination of geopolitical and macroeconomic factors. Escalating US-Iran tensions sent crude oil prices higher, boosting the dollar as a safe haven, according to the report. President Trump threatened Iran with fresh strikes, marking the worst skirmish since the ceasefire began in April. At the same time, US CPI inflation rose to 4.2% in May, its third straight monthly acceleration and fastest in more than three years, matching forecasts of 4.2% and up from 3.5% in the prior month.
Analysts at Motilal Oswal Financial Services, through analyst Manav Modi, said stronger Treasury yields and a firmer dollar have reduced demand for precious metals. Reuters reported that US weekly jobless claims rose to 229,000, above forecasts of 219,000, but stronger producer and consumer inflation data reinforced expectations of a tighter monetary policy. Traders are currently pricing a 69% chance of a US rate hike in December ahead of next week's Federal Reserve meeting.
Supply-Side and Demand-Side Factors
On the supply side, the report highlighted that sustained outflows from gold-backed ETFs have weighed on investor sentiment, according to Saumil Gandhi of HDFC Securities. In addition, speculation that investors were liquidating positions to free up liquidity for the SpaceX IPO could have been instrumental in the selloff, the article noted.
On the demand side, the European Central Bank (ECB) is widely expected to hike its benchmark rate by a quarter percentage point, as inflation risks outweigh the slow growth risk. A hawkish ECB move would be bearish for gold, according to the report.
Market Outlook
Spot gold, which was trading with a gain of 0.50% at $4,095 at the time of writing, may test the $4,000 mark and fall to $3,900 in the near future, though it may consolidate its losses in the short run, according to Praveen Singh, Head of Commodities at Mirae Asset ShareKhan. He identified resistance at $4,200 and $4,275.
Investors are now awaiting the US Producer Price Index (PPI) report and comments from Federal Reserve officials for clues on interest rates. The combination of persistent inflation, a hawkish Fed, and geopolitical uncertainty is likely to keep precious metals volatile in the near term.
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