Gold and silver prices remained volatile on Monday, 20 July, as escalating clashes between the US and Iran over the weekend were followed by reports of renewed diplomatic efforts, leaving the near-term outlook for precious metals uncertain.
Investors also continued to assess the evolving conflict and its implications for crude oil prices, inflation, and global monetary policy.
While geopolitical uncertainty typically supports safe-haven demand, the renewed tensions have also increased the likelihood of the US Federal Reserve keeping interest rates higher for longer, limiting the upside in gold and silver after their brief recovery earlier this month.
After declining 2.13% last week and extending its losing streak to a second consecutive week, COMEX gold futures steadied around $4,000 per troy ounce in Monday’s trade. Meanwhile, COMEX silver futures gained 1.3% to $57.75 per ounce.
Middle East tensions in focus
Oil prices, which had climbed to a more than one-month high earlier in the session, later pared their gains after Iran’s Foreign Ministry said negotiations with the United States could still continue if they aligned with the country’s national interests.
Even so, elevated crude oil prices continue to fuel inflation concerns and reinforce expectations that US interest rates will remain higher for longer. Meanwhile, the US carried out its tenth consecutive day of strikes aimed at weakening Tehran’s ability to disrupt shipping through the Strait of Hormuz.
During the latest phase of the conflict, Iran has largely focused its attacks on US-allied Arab states rather than Israel, which launched the military campaign alongside the United States on 28 February.
The Iran conflict, now in its fifth month, has once again pushed up prices of key commodities used in manufacturing and food production, adding to inflationary pressures across global economies.
Gold fell below $4,000 an ounce on multiple occasions in June, marking its worst monthly performance since the 2008 global financial crisis.
The precious metal has since traded in a narrow range around that level and remains more than 25% below its January peak. Silver lost 21% last month and is currently trading 53% below its January high of $121 per ounce.
“A softer CPI print offered bullion a brief midweek lift, but renewed conflict escalation quickly reasserted the inflation and higher-for-longer narrative, pressuring non-yielding assets. With oil-driven inflation risk still alive against a patient but watchful Fed, the outlook for precious metals stays skewed toward the downside with every fresh escalation,” said Kaynat Chainwala, AVP – Commodity Research, Kotak Securities.
Meanwhile, Cleveland Fed President Beth Hammack joined a growing number of policymakers suggesting that interest rates may need to rise further to curb persistent inflation, setting the stage for a closely watched debate at the Federal Reserve’s next policy meeting and raising the possibility of dissenting views under Chair Kevin Warsh, Reuters reported.
According to the CME FedWatch Tool, traders now see an 83% probability of a US interest rate hike in December, up from 73% a week ago.
MCX gold, silver remain volatile
Tracking mixed cues from the international market, the near-month MCX gold futures contract rose ₹1,300 to ₹1,42,287 per 10 grams. However, the yellow metal ended last week with a loss of ₹2,572, adding to the ₹3,900 decline recorded during the first week of July.
MCX silver futures also traded cautiously,₹4,005 to ₹2,20,408 per kg”> rising ₹4,005 to ₹2,20,408 per kg. Despite Monday’s recovery, the white metal has ended seven of the last eight weeks in the red, losing a cumulative ₹55,443, and is now trading nearly ₹84,500 below its May peak of ₹3,04,891 per kg.
(With inputs from agencies)
Disclaimer: We advise investors to check with certified experts before making any investment decisions.
