Silver prices were flat on Wednesday, 27 May as investors awaited comments on developments around the US-Iran peace deal as well as cues on the US Fed monetary policy. However, gains were capped as a stronger US dollar, rising crude oil prices and escalating tensions in the Persian Gulf dampened investor sentiment and reinforced fears that inflation could remain elevated for longer, potentially forcing central banks to keep interest rates high.
In India, MCX silver was steady, up 0.7% to ₹2,72,628 per kg, while MCX Gold price was also flat at ₹1,57,898 per 10 grams.
The precious metals market continued to react to developments in the Middle East after US and Iranian forces reportedly clashed near the Strait of Hormuz overnight. The fresh military strikes highlighted the fragile situation between the two nations even as both sides continued to signal progress toward an interim peace agreement.
Oil markets also remained highly volatile amid the geopolitical developments. Brent crude climbed above $100 per barrel after having slumped more than 7% earlier this week, reflecting heightened uncertainty around global energy supplies and the future of shipping through the Strait of Hormuz, one of the world’s most critical oil transit routes.
Meanwhile, in international markets as well, Spot gold declined 1.4% to $4,506.48 an ounce as of 3:48 p.m. in New York, which translates to around 1:18 a.m. IST on Thursday. Silver fell 1.5% to $76.92 an ounce.
What’s driving the precious metals prices?
Gold and silver remained muted as investors continued to remain cautious about inflation risks arising from higher energy prices and prolonged geopolitical instability. The US dollar also held firm after renewed US strikes on Iranian targets reduced hopes of an immediate diplomatic breakthrough and delayed expectations around the reopening of the Strait of Hormuz.
The latest exchange of strikes came only hours after US President Donald Trump said negotiations with Tehran to extend the ceasefire and reopen the strait were progressing. However, US Secretary of State Marco Rubio indicated that discussions could still take several days before any concrete resolution emerges.
Iran, meanwhile, accused the United States of violating the ceasefire after strikes were carried out near the disputed Strait of Hormuz, potentially complicating ongoing diplomatic efforts aimed at ending the conflict and restoring normal shipping activity in the region.
The decline is precious metals can be attributed to the combination of rising oil prices and geopolitical uncertainty, which has strengthened concerns that inflation could remain sticky. This reduced the likelihood of aggressive interest rate cuts by the US Federal Reserve in the near term, aiding to the weak sentiment.
Higher oil prices typically feed into inflation through increased transportation, manufacturing and energy costs. This has led investors to reassess expectations around monetary easing, particularly at a time when the Fed remains focused on controlling inflation.
A stronger dollar has also added pressure on precious metals prices because gold and silver become more expensive for holders of other currencies. Investors are now closely watching comments from Federal Reserve policymakers for further clarity on how inflation trends could influence future interest rate decisions.
The April US Personal Consumption Expenditures (PCE) data, scheduled for release on Thursday, is also expected to play a crucial role in shaping expectations around the Fed’s policy stance in the coming months.
Outlook ahead
Renisha Chainani, Head of Research at Augmont, said gold has declined nearly 15% and silver almost 20% since the conflict began, as fears of energy-driven inflation strengthened expectations of tighter monetary policy from central banks. However, she noted that the sharp correction in oil prices earlier this week has partially eased inflation concerns and moderated aggressive rate hike expectations.
According to Chainani, gold is currently trading in a broad range between $4,450 and $4,600 per ounce. She noted that the Relative Strength Index (RSI) stood at 46, indicating neutral momentum, while the MACD indicator remained flat, reflecting a lack of strong directional conviction in the short term.
She added that silver continues to oscillate within the $72 to $78.50 range and is likely to remain range-bound unless there is a decisive breakthrough in US-Iran negotiations.
Market participants are expected to remain highly sensitive to developments surrounding the Middle East conflict, movements in crude oil prices and incoming US inflation data, all of which could significantly influence the trajectory of precious metals in the near term.
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.
