MCX gold and silver prices are heading for their largest weekly decline in over a month, as traders shy away from precious metals, with concerns mounting that a sharp rise in crude oil prices could lead to prolonged inflation and potentially higher interest rates, thereby overshadowing the deepening tensions in the Middle East, which are now likely to extend into a fourth week.
Global central banks, including the US Federal Reserve, have recently sounded caution over the Middle East conflict, expecting its impact on prices to persist throughout this year, thereby diminishing hopes of near-term rate cuts.
Policymakers at the US central bank have said they will proceed with interest rate decisions only once inflation shows clear signs of easing, which in turn depends on how long the US-Iran conflict continues.
Higher interest rates tend to increase the relative appeal of yield-bearing assets such as government bonds compared to non-yielding precious metals like gold.
Gold surged during the 12-day conflict with Iran last year but gave up those gains after a ceasefire was announced. However, three weeks into the latest conflict, domestic gold prices have dropped by ₹15,000 so far this month.
April gold futures had earlier risen from ₹1,62,104 to ₹1,66,074 per 10 grams after the US and Israel launched strikes on Iran on 28 February, aligning with the trend that geopolitical turmoil typically drives investors toward traditional safe-haven assets.
Nevertheless, prices have declined sharply since then, with the yellow metal witnessing a steep sell-off, falling to a low of ₹1,45,570 today.
Gold and silver are on track for sharpest weekly fall since January
So far this week, ₹12,766″>gold has dropped ₹12,766 per 10 grams (based on today’s low of 1,45,570), putting it on track for its biggest weekly decline since late January. The sell-off has also dragged prices down by ₹15,330 in March so far, and if gold closes the month in the red, it would mark the first such decline in 15 months.
Silver, which is more volatile than gold, is down by nearly ₹29,645 per kilogram (based on today’s low of ₹2,28,871), so far this week.
The last time silver saw its biggest weekly decline was during the final week of January, when it crashed ₹69,047 per kilogram.
Is gold losing its safe-haven appeal amid global uncertainty?
Manav Modi, commodities analyst at Motilal Oswal Financial Services, said, “Safe-haven demand for bullion was largely overshadowed by a sharp rally in the US dollar and Treasury yields, as investors positioned for tighter financial conditions.”
Oil prices surged to near four-year highs during the week, following continued strikes on Middle Eastern energy infrastructure, raising concerns over sustained supply disruptions and elevated inflation.
In response, global central banks adopted a cautious stance, with the Reserve Bank of Australia hiking rates, while the Federal Reserve, European Central Bank, Swiss National Bank, and Bank of Japan held rates steady and signalled limited scope for easing in the near term.
Additionally, Modi said that market participants are now factoring in up to two rate hikes from the Bank of England this year, further reinforcing expectations of tighter monetary policy and limiting the upside in gold despite persistent geopolitical risks.
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