Gold prices extended their retreat for a fifth straight session on Thursday, with spot gold falling ₹1,573 to ₹1.46 lakh per 10 grams in domestic futures trade, tracking losses in international markets as escalating Middle East tensions reinforced fears of higher inflation and interest rates. On the Multi Commodity Exchange, the yellow metal for August delivery decreased by ₹1,573, or 1.08 per cent, to ₹1,46,444 per 10 grams, hitting a nine-week low. In global markets, Comex gold futures fell another $87 per troy ounce to $4,046, the lowest level since November 2025, with the yellow metal tumbling nearly 10% over the last five sessions. According to LiveMint, investor appetite for safe-haven assets remained subdued as growing tensions in West Asia strengthened expectations of higher interest rates, making both gold and silver less attractive since they do not generate interest income.
Gold prices steadied on Monday as traders weighed Iran's signal to end its current military operations against Israel, but the situation has now escalated with Tehran announcing a complete closure of the Strait of Hormuz to all vessels following a second night of clashes between the two sides. US President Donald Trump said he would continue bombing Iran if it refused to agree to an interim peace deal, with both the US and Iran having held multiple rounds of negotiations but failing to reach an agreement. The renewed attacks have reignited concerns that a potential peace deal in the region could be pushed further away, while also reviving fears that disruptions to shipping through the Strait of Hormuz may persist for longer than previously anticipated. As per LiveMint, the back-and-forth between hopes of de-escalation and fears of further conflict has kept precious metals highly volatile, with the conflict's impact on energy costs becoming increasingly apparent.
Silver futures on MCX also plunged ₹5,012 per kilogram to an intraday low of ₹2,30,493, the lowest level since April 28, with the white metal down ₹74,398 from its May high of ₹2,84,891. After touching the ₹3 lakh mark in mid-May, silver has remained under sustained selling pressure and is now down ₹74,398 from that peak, highlighting the sharp correction in prices. The latest decline also widened silver's weekly losses to 8%, extending its losing streak to a fifth consecutive week. This dramatic fall reflects the broader weakness in precious metals as investors seek alternatives amid the escalating Middle East tensions and strengthened expectations of higher interest rates.
US producer prices climbed 6.5% year-on-year in May, the sharpest increase since November 2022 and above expectations of 6.4%, reflecting the deepening impact of the Strait of Hormuz closure on energy costs. This inflation data has strengthened expectations of a US Federal Reserve rate hike after US inflation rose in May to its highest level in over three years, driven by sharp increases in energy prices. The European Central Bank raised interest rates to tackle rising price pressures caused by the conflict, becoming one of the first major central banks to respond to the inflationary impact of the Iran conflict. Central banks in Australia and the Philippines have also raised rates since the start of the war, with attention now turning to policy decisions in larger economies. The US Federal Reserve is expected to keep its benchmark interest rate unchanged when it meets next week under Chair Kevin Warsh, who was appointed earlier this year by President Donald Trump.
Goldman Sachs expects the U.S. Federal Reserve to keep interest rates unchanged through 2026 and delay rate cuts until 2027, citing stronger economic activity and jobs growth. The latest labour market data reinforces this outlook, as markets are now pricing in a more than 70% chance of a Fed rate hike by December based on the CME FedWatch tool. This expectation of higher rates makes gold less attractive to investors seeking returns on their investments, with the U.S. economy's strong performance providing the Fed with more room to maintain restrictive policy. According to Augmont's Renisha Chainani, US inflation rose in May to its highest level in over three years, driven by sharp increases in energy prices, and fresh comments from President Trump have kept market sentiment cautious. The prolonged conflict and near-complete shutdown of the Strait of Hormuz continue to disrupt energy supplies from the Persian Gulf, stoking fears of renewed inflation and possible central bank rate increases.
