Precious metals traded higher on Wednesday, 13 May, with gold recording modest gains and silver continuing its upward surge, supported by sustained investor interest and tightening physical market conditions.
COMEX gold futures jumped $49 per troy ounce to an intraday high of $4,734. Meanwhile, silver futures surged $4.30 to $89.88, hitting their highest level in two months. Over the last eight trading sessions, the white metal has rallied 22.3%.
The modest gain in the yellow metal is largely stemmed from higher-than-expected US inflation data for April, which increased expectations of a potential 25-basis-point Federal Reserve rate hike by December. However, the yellow metal remained relatively resilient, supported by continued central bank buying and safe-haven demand.
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Gold and silver prices surged due to sustained investor interest, tightening physical market conditions, and higher-than-expected US inflation data. India’s decision to raise import tariffs on gold and silver also contributed to the rally in domestic markets.
Higher-than-expected US inflation data for April increased expectations of a potential Federal Reserve rate hike, which is generally negative for gold. However, gold remained resilient due to central bank buying and safe-haven demand.
India raised import tariffs on gold and silver to 15% from 6% to curb overseas purchases and ease pressure on foreign exchange reserves. This move led to a significant rally in domestic gold and silver futures prices.
The higher import duties are expected to weigh on domestic physical demand, particularly in price-sensitive segments. Consumers may opt for lower purity jewelry or reduce purchase sizes for unavoidable buys like weddings.
Gold ETFs are expected to benefit from the duty hike as they offer advantages like no making charges, purity assurance, and clean tax treatment. Some investors may switch from physical jewelry to gold ETFs due to the increased costs associated with physical gold.
Traders in the interest-rate swaps market are now pricing in roughly a one-in-three chance of a Fed rate hike by year-end, up sharply from near-zero expectations at the end of last month. Higher interest rates are generally negative for gold, as the metal does not offer any yield, Bloomberg reported.
“Precious metals initially came under pressure after stronger-than-expected US inflation data lifted Treasury yields and strengthened the US dollar, typically an unfavourable environment for non-yielding assets such as gold. Rising consumer prices were largely driven by higher gasoline costs amid the ongoing Iran conflict,” said Kotak Securities.
However, gold continues to display resilience despite elevated rate expectations, mainly due to sustained central bank accumulation and geopolitical uncertainty supporting safe-haven demand.
On the downside, the brokerage said India’s sharp increase in import tariffs on gold and silver may temporarily weigh on physical demand. Overall, the broader fundamental outlook for both gold and silver remains cautiously bullish, supported by geopolitical risks, persistent inflation uncertainty, and continued central bank buying.
In the energy market, oil prices eased modestly after surging for three consecutive sessions, as diplomatic efforts to resolve the US-Iran conflict failed to produce meaningful progress, keeping inflation risks elevated.
Elsewhere, US President Donald Trump’s visit to China will be closely watched for any developments regarding the fragile trade truce and the Iran conflict.
MCX gold jumps over ₹11,000; silver reclaims ₹3 lakh mark
In the domestic market, the near-month gold futures contract on MCX surged ₹11,055 per 10 grams to touch ₹1,64,497, marking the highest level since 12 March. Meanwhile, silver futures on MCX jumped ₹25,000 per kilogram to reclaim the ₹3 lakh mark, touching ₹3,04,177, the highest level in over three months.
The sharp rally in domestic precious metals followed the Indian government’s decision to raise import tariffs on gold and silver to 15% from 6%. The move is part of broader efforts to curb overseas purchases of precious metals and ease pressure on the country’s foreign exchange reserves.
While the higher duties are expected to weigh on domestic demand, economists believe the measures could help narrow India’s trade deficit and support the rupee, which remains one of Asia’s weakest-performing currencies.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
