Gold and silver prices witnessed renewed selling in Monday’s trade as tensions in the Middle East resurfaced, raising concerns regarding the effectiveness and long-term viability of a long-term truce between the US and Iran.
COMEX gold futures dropped by $127 per troy ounce to an intraday low of $4,808, while silver futures fell $3.13 to a low of $78.71. Both metals had closed last week with sharp gains, with gold rising 2% and silver rallying 7%.
Investor interest in precious metals had remained strong in recent weeks, supported by easing geopolitical tensions and softer inflation concerns. However, that optimism appears to be fading after US President Donald Trump said that the US had fired upon and seized an Iranian-flagged cargo ship in the Gulf of Oman.
The Iranian ship “is under US Treasury sanctions due to its prior history of illegal activity. We have full custody of the ship and are assessing what’s on board,” Trump said in a Truth Social post.
Trump further threatened to target Iran’s power plants and bridges if the country did not agree to a deal with the US. The ceasefire between the two nations is set to expire this week.
Iran’s joint military command reportedly said Tehran would respond soon, termed the US action an act of piracy, and abruptly halted traffic through the waterway less than 24 hours after previously allowing passage, heightening fears of a renewed escalation in hostilities.
Iran also reportedly said on Monday that it has no immediate plans to attend talks with the United States, with the truce set to expire shortly.
Trump reiterated that the US blockade of the strait would remain in place until Iran agreed to US demands, despite Tehran’s stance.
As tensions escalated, the dollar index strengthened, making dollar-denominated bullion more expensive for holders of other currencies. Benchmark 10-year US Treasury yields also rose, increasing the opportunity cost of holding non-yielding bullion.
Although gold is traditionally considered a hedge against inflation and a safe-haven asset during geopolitical and economic uncertainty, rising energy costs linked to the Iran conflict have fuelled inflation concerns and pressured prices lower amid expectations of monetary tightening by the US Federal Reserve.
MCX gold fell over 1800; silver falls back to ₹2.50 lakh
In the domestic market, the near-month gold futures contract on MCX dropped ₹1,810 to ₹1,52,799 per 10 grams, while silver futures on MCX also fell ₹6,412 per kilogram, touching an intraday low of ₹2,50,730 earlier in the day.
The yellow metal has recovered ₹10,327 over the past three weeks and has also rallied ₹25,014 from its March low of ₹1,29,595. Meanwhile, silver futures have gained ₹29,188 over the last three weeks and rebounded ₹57,499 from their March low of ₹1,99,643.
(With inputs from Reuters)
Disclaimer: We advise investors to check with certified experts before making any investment decisions.
