Gold and silver prices entered the week on a slightly bearish tone, with direction likely to be driven more by overall risk sentiment than traditional safe-haven demand. According to The Times of India, international spot gold prices declined around 2.5% last week to around $4,712 per ounce, while domestic MCX gold prices fell around 1.24% to ₹1,52,699 per 10 gms. This has brought gold's year-to-date gains down to 9%, indicating some cooling after the strong rally seen earlier this year. The latest Bloomberg data shows spot gold closed 0.1% lower at $4,614.21 an ounce in New York, marking a second consecutive weekly decline as traders digest the latest developments in the US-Iran standoff. MCX gold June futures traded 0.23% lower at ₹1,51,005 per 10 grams in Monday morning deals, while MCX silver July futures were 0.15% down at ₹2,50,549 per kg around 9:10 am, according to Mint. On the MCX, gold futures declined ₹1,347, or nearly 1 per cent, to close at ₹1.51 lakh per 10 grams, while silver outperformed and gained ₹879 to settle at ₹2.50 lakh per kilogram during the past week, as reported by The Hindu BusinessLine.
While gold struggled, silver advanced 2.2% to $75.36 an ounce on Friday, adding to Thursday's 3.4% gain, according to Bloomberg. This surge in silver prices comes as the Bloomberg Dollar Spot Index rose 0.1% after losing 0.8% on Thursday, making precious metals more expensive for most buyers. The divergent performance highlights the selective nature of current market movements, with silver benefiting from its industrial applications while gold faces pressure from both geopolitical uncertainties and monetary policy concerns. The dollar's strength after Trump threatened to hike tariffs on EU-made automobiles has created headwinds for non-yielding bullion, as a stronger greenback typically makes precious metals more expensive for most buyers. In international markets, Comex gold futures declined $96.4, or 2.03 per cent, to end at $4,644.5 per ounce over the past week, while silver fell nearly 1 per cent to close at $75.84 per ounce in New York, as reported by The Hindu BusinessLine.
The Federal Open Market Committee (FOMC) began its two-day meeting, with the Central Bank expected to hold rates steady at 3.50-3.75%. As reported by The Economic Times, gold's June futures corrected by over ₹3,000 or 2% to hit the day's low of ₹1,48,681 as investors remain cautious ahead of the Fed's policy outcomes. The broader trend shows loss of bullish momentum and formation of lower highs, indicating rallies are likely to face selling pressure. The University of Michigan survey shows inflation expectations climbing to 3.5% in April, creating a dilemma for the Fed as it balances inflation concerns against growth threats from prolonged conflict. Fed Chair Jerome Powell noted that the central bank needs to see tangible progress on its 2% target before considering easing, and a prolonged conflict would delay inflation's return to that goal. This hawkish stance effectively removes near-term rate cuts from the table, creating a primary near-term risk to gold as higher real interest rates and a strong dollar typically weigh on the non-yielding metal. According to The Hindu BusinessLine, bullion prices weighed by a shift in investor preference towards risk assets such as equities and caution from key central banks over inflationary pressures linked to elevated crude oil prices.
The nine-week conflict between the US and Iran that's upended global energy flows continues to create market uncertainty, with President Donald Trump on Friday expressing displeasure with the current state of negotiations but stopping short of threatening fresh military action. According to Bloomberg, Iran's state-run media said Tehran delivered a new proposal to Washington via Pakistan, which mediated a first round of direct negotiations last month. However, it wasn't immediately clear whether Trump's remarks referred to that proposal. The closure of the Strait of Hormuz and resulting energy price shock has dimmed the prospect of interest rate cuts, creating a headwind for non-yielding bullion. The U.S. naval blockade of Iranian ports has triggered the largest oil supply disruption in history, with the conflict effectively closing the Strait of Hormuz, a critical chokepoint, leading to global oil prices surging above $106 per barrel. The uptick in the US dollar and persisting concerns over a spike in inflation due to higher-for-longer crude oil prices are contributing to the current downward pressure on gold prices. As per The Hindu BusinessLine, exchange traded fund investors remained net sellers in the previous week, while the latest weekly holdings data is scheduled for release on Monday.
Despite short-term price volatility, central banks added gold holdings in the first quarter at the fastest pace in more than a year, according to the latest data by the producer-funded World Gold Council, as reported by Bloomberg. Greg Shearer, head of precious and base metals research at JPMorgan Chase & Co, noted that continued retail buying in China had helped support prices in recent months, and the broad trend of central bank accumulation was still intact. Shearer emphasized that "there's not a ton of conviction around the near-term trajectory, even if the medium-term bull story, which we agree with, is still broadly consensus." He added that "a clear de-escalation in the Middle East and an accompanying dip in interest rate expectations and the dollar would mean 'it's game-on again for gold." The long-term trajectory for gold remains intact, with the current market setup defined by a powerful collision between geopolitical supply shock and a monetary policy cycle already tilted toward higher-for-longer rates. According to The Hindu BusinessLine, on the demand front, gold demand remained mixed last week amid volatile global prices and a weaker rupee kept buyers away, and same was case across other centres.
