Gold rate today: The domestic gold futures kicked off the evening trade on the Multi Commodity Exchange (MCX) on a tepid note, tracking the weakness in the international markets as the US dollar strength outweighed the geopolitical risks stemming from US-Israeli military action against Iran.
MCX gold futures for April expiry opened with a 3% cut at ₹161,092 per 10 grams as against its last close of ₹166,074. MCX was closed for trading in the morning session on account of a public holiday to mark the festival of Holi.
At the same time, silver prices on MCX traded with a steeper decline of 6% as it traded at ₹261,773 per kilogram.
The weakness in the domestic futures market mirrored the global market trend, wherein US spot gold prices briefly slipped below the $5,200 mark as they cracked 3%, and silver faced an even bleaker fate with its 11% crash to below the $80 level at one point.
Why are gold and silver prices falling?
Additionally, fading expectations of an interest rate hike in the US by its central bank in the near term are another factor weighing on domestic and international gold prices.
Since gold is a non-yielding asset, it thrives in a low-interest-rate environment. The US Federal Reserve is expected to hold rates at the conclusion of its next two-day meeting on March 18, suggests CME Group’s FedWatch tool, a Reuters report said.
The conflict in the Middle East has already resulted in a spike in energy prices, which could trickle into inflation data and could be an influencing factor in the US Fed’s decision. The probability of a rate hold in June, previously below 45%, has now risen to more than 60%.
That said, gold prices gained amid tensions in the Middle East, which prompted investors to seek safe havens. US President Donald Trump said the US would continue its military offensive for as long as it takes, and Israel announced a “wave of strikes” targeting Iran’s command centres. Tehran, meanwhile, has attacked oil and gas infrastructure and threatened shipping in the strategic Strait of Hormuz.
Gaurav Garg, Research Analyst at Lemonn Markets Desk, said that a pronounced risk-off sentiment largely drove the latest rally in gold and silver, as investors rotate capital out of equities and into precious metals to hedge against potential war-related disruptions.
Concerns over crude oil supply through the Strait of Hormuz have added to inflationary fears, further supporting bullion prices, said the expert.
That said, he expects the volatility in the bullion market to remain heightened. In case of further escalation, gold price target of ₹1,70,000 per 10 grams and silver rate target of ₹3,00,000 per kg in the near term cannot be ruled out, he said.
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