Spot gold is currently trading near ₹3.6 lakh per 10 grams ($4,480), representing a 6% decline from last Monday's $4,730 level. According to reports from Business Standard, this marks gold's lowest level since March as the metal faces simultaneous pressure from rising bond yields and a strengthening dollar. The dollar index has climbed over 1% to around 99.4, hovering near a six-week high, which has stripped one of gold's most reliable support pillars. The broader currency market shows mixed performance with GBP/USD trading at 1.3392 after reaching a daily high of 1.3437, while the USD strengthened 0.51% against the Euro.
The Federal Reserve's hawkish stance has intensified market expectations for rate hikes, with CME FedWatch now showing a 40% probability of a rate hike by year-end. As reported by Business Standard, Fed commentary has amplified the hawkish tilt, with several regional presidents reiterating that containing inflation remained the priority. The 10-year Treasury yield surged to a 16-month high of 4.687% on Tuesday, while the 30-year bond climbed to an 18-year high of 5.2%, reflecting markets fully pricing out near-term easing. The US economic docket was absent, with traders eyeing the release of the minutes of the Fed's last monetary policy meeting led by outgoing Chair Jerome Powell, followed by Kevin Warsh's swearing-in as the new Chief of the US central bank on Friday.
The macro pressure has been building since last Tuesday with diplomatic efforts stalled and the Strait of Hormuz remaining largely closed. According to Business Standard, with crude oil prices staying elevated, this has reinforced a higher-for-longer rate narrative that has proven deeply unfavourable for the non-yielding metal. US crude oil benchmark WTI is up 0.79% at $103.29 a barrel, even though US President Donald Trump is optimistic about reaching a deal with Tehran. On Monday, he posted that he would not proceed with an attack against Iran on Tuesday, due to its allies pushing to strike a deal. However, Iran's proposal has not changed from its previous offer, in which it delayed discussions on uranium enrichment. US consumer prices rose 3.8% in April, the highest reading since May 2023, while wholesale inflation accelerated at its fastest pace since 2022, both driven substantially by energy cost pressures stemming from the Hormuz disruptions.
For MCX, the picture diverges sharply as domestic gold prices are up around 3% since last week, following India's decision to double gold import duties from 6% to 15% effective May 13. As reported by Business Standard, this move aimed at defending the rupee and containing the swelling import bill amid the ongoing West Asia crisis. According to Kotak Securities, the government's recent import restrictions and customs duties hike can slow dollar outflows in the near term, but the ability to meaningfully stabilise the rupee is limited, especially if global dollar strength persists or foreign capital inflows remain weak. India's external balance remains far more sensitive to crude oil prices than to bullion imports, with crude oil prices staying elevated as the main swing factor as energy imports remain the dominant driver of dollar outflows.
Until the Strait of Hormuz fully reopens and energy prices begin to ease meaningfully, inflation pressures are likely to remain elevated, limiting the Federal Reserve's ability to shift toward accommodation. According to Business Standard, markets are awaiting this week's FOMC minutes for further clarity on the policy trajectory. De-escalation carries the greater directional significance for bullion prices this year, while the Fed will determine the extent of any sustained move. As per Kotak Securities, volatility is likely to remain elevated and potentially exceed levels markets have become accustomed to in recent years, with the combination of unresolved conflict, contested Fed policy path, and India's duty shock significantly reducing visibility across asset classes. The expert analysis suggests that both metals have already set records this year and pulled back sharply, with gold's all-time high at $5,585 against a current price near $4,532, while silver hit $121.6 before pulling back into structural consolidation.
