Precious metals witnessed renewed selling pressure on Thursday, 21 May, as the rebound in crude oil prices heightened inflation concerns, boosting expectations of further US rate hikes and lifting Treasury yields and the dollar, which added pressure on safe-haven assets.
Comex gold fell by $47 per troy ounce to an intraday low of $4,488, while silver futures declined by $1.5 per ounce to $74.69. Since the start of the war in late February, gold has lost 14% and silver has been down by 18.3%.
Hopes of potential de-escalation in West Asia were once again tested after Iran’s Supreme Leader said the country must retain its uranium, according to Reuters, tempering optimism that the warring sides were moving closer to a deal to reopen the Strait of Hormuz.
Ayatollah Mojtaba Khamenei’s order could complicate talks aimed at ending the US-Israeli conflict involving Iran, reinforcing fears that supply disruptions through the Strait of Hormuz could persist for longer.
US President Donald Trump has assured Israel that Iran’s stockpile of highly enriched uranium would be removed and that any peace deal must include that demand, according to Israeli officials cited by Reuters.
The US president also said on Wednesday that he could wait a few days for “the right answers” from Tehran, which had helped Wall Street stocks rally, but added that he was also willing to resume strikes on the country if necessary.
The nearly three-month conflict in the Middle East has kept Brent crude oil prices above $100 per barrel, fueling concerns that the US Federal Reserve could opt for another rate hike before year-end rather than a rate cut.
Meanwhile, minutes from the Federal Reserve’s latest policy meeting showed that most officials believe a rate hike this year could still be warranted if inflation remains above the Fed’s 2% target.
Those expectations have kept US bond yields elevated, making non-yielding bullion less attractive for investors. Besides, the US dollar firmed on Thursday, with the dollar index rising to 99.41 against a basket of currencies, making precious metals more expensive for holders of other currencies.
Traders now see a 58% chance of at least one 25-basis-point interest rate hike by the US Federal Reserve this year, compared with 48% a day earlier, as per CME’s FedWatch Tool.
MCX gold, silver remain weak
Tracking weakness in the international market, the near-month gold futures contract on MCX fell by ₹1,464 per 10 grams to ₹1,58,542. In the previous session, the yellow metal had settled above the ₹1.60 lakh mark for the first time in four sessions.
The silver futures contract on MCX also resumed its losing streak, declining by ₹5,515 per kilogram to hit the day’s low of ₹2,68,750. Today’s decline completely erased Wednesday’s gain of ₹4,146, although the metal continued to trade comfortably above the ₹2.50 lakh mark.
Last week, the industrial metal had also crossed the ₹3 lakh mark for the first time in over two months.
Disclaimer: We advise investors to check with certified experts before making any investment decisions.
