MCX gold futures for the June contract traded 0.41% lower at ₹1.58 lakh per 10 grams in early trade on Wednesday (May 20), slipping further from the ₹1.60 lakh per 10 grams mark. Silver futures for the July contract fell 0.79% to ₹2.67 per kilogram, reflecting broader weakness in precious metals markets. The decline comes as internationally, spot gold fell 0.71% to $4,479.10 per ounce and spot silver declined 1.40% to $71.11 per ounce during early COMEX trading. Futures in New York are down 0.2% to $4,549.30 per ounce, showing continued pressure from multiple headwinds including currency strength and expectations of continued monetary policy tightening.
Market sentiment remained cautious amid escalating tensions between the United States and Iran. US President Donald Trump warned that Washington could resume strikes on Iran within days if negotiations failed, after previously saying he had paused planned military action following appeals from Gulf allies. The prolonged conflict has also disrupted shipping through the Strait of Hormuz, keeping crude oil prices elevated and adding to inflationary concerns. Brent crude remained near $111 per barrel, while US WTI crude traded close to $104 per barrel despite mild declines on Wednesday (May 20). The escalation provides fresh uncertainty to markets that had previously found some relief when Trump decided to hold off on a planned attack on Iran.
Higher oil prices and persistent inflation have led traders to further scale back expectations of US Federal Reserve rate cuts this year, while some market participants are now also factoring in the possibility of another rate hike. Concerns over price pressures stemming from elevated energy prices have stoked inflation fears, raising the risk that central banks may need to keep rates elevated rather than deliver cuts investors had expected. Benchmark 10-year U.S. Treasury yields were near a more than one-year high, while the U.S. dollar strengthened as investors eyed a possible hawkish shift by the Federal Reserve to curb energy-driven inflation. Soaring inflation forces central banks to keep rates high to ease price pressures, creating a challenging environment for non-yielding assets like gold.
Lower rates benefit bullion, which doesn't carry interest, according to market analysis. However, markets now see very limited scope for rate cuts through most of 2026, with expectations shifting toward no change or tightening later in the year. Higher Treasury yields raise the opportunity cost of holding non-yielding gold and a stronger dollar makes greenback-priced commodities more expensive for other currency-holders. Gold has traded in a narrow range since falling sharply in the early days of the conflict as inflationary fears were moderated by the possibility of monetary easing on growth concerns, but current conditions favor higher rates. Analysts said bullion prices may remain volatile in the near term as investors await fresh signals from the Federal Reserve and further developments in the West Asia.
The precious metals selloff extended beyond gold, with spot silver declining 1.40% to $71.11 per ounce during early COMEX trading. Platinum lost 2.2% to $1,936.10 and palladium dropped 4.2% to $1,359.26. J.P. Morgan on Sunday forecast $2,400/oz for platinum in the fourth quarter of 2026 and sees palladium at $1,600/oz in the same period. Despite being an inflation hedge, gold usually comes under pressure in high interest rate environments, creating a more challenging backdrop for precious metals prices.
