Gold and silver are expected to remain volatile with a corrective bias in the coming week as investors assess the latest flare-up in the US-Iran conflict, movements in crude oil prices and inflation data that could reshape expectations for global interest rates, analysts said.
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 and subsequently announced the closure of the Strait of Hormuz.
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 said 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 will strengthen safe-haven assets like the US dollar and Treasury bond yields,” said Pranav Mer, Senior Vice President, EBG – Commodity & Currency Research, JM Financial Services Ltd.
Besides geopolitical developments, markets will closely watch inflation data from India, the EU, 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 fell Rs 3,900, or 2.65 per cent, during the week to close at Rs 1.43 lakh per 10 grams.
Silver for the September contract also plunged Rs 14,746, or 6.2 per cent, to 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, LKP Securities, said.
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,” Trivedi added.
In the international markets, Comex gold futures slipped USD 12, or 0.3 per cent, to end at USD 4,113.7 per ounce in New York, while silver fell 1.5 per cent, to USD 60.16 per ounce.
Analysts said market participants will closely monitor a series of key US economic indicators, including retail sales, housing data and weekly jobless claims, for further clues on the Federal Reserve’s policy path.
Chinese economic indicators, including GDP growth, industrial production, fixed asset investment, bank lending and trade data, will also be in focus as they could influence the outlook for industrial metals, which have shown signs of recovery over the past few sessions, Pranav Mer said.
According to Trivedi, the repeated failure of bullion prices to hold on to gains reflects a cautious market where investors continue to use rallies to book profits rather than initiate fresh bullish positions.
“Unless there is a significant shift in geopolitical developments or macroeconomic indicators, the sentiment remains cautious until stronger fundamental triggers emerge,” he added.
