Gold and silver prices climbed in the domestic futures market on Monday (27 July) morning, amid a decline in the US dollar following a significant drop in crude oil prices due to a pause in hostilities between the US and Iran over the weekend.
MCX gold August contract rose about 0.50% to ₹1,43,784 per 10 grams, while MCX silver September futures jumped more than 1% to ₹2,24,550 per kg in morning trade on Monday.
The dollar index dropped more than 0.30%, making greenback-denominated precious metals more affordable for buyers in overseas currencies.
Oil prices plunged 5% on Monday after the US and Iran suspended military strikes over the weekend, following two weeks of hostilities.
While there are no clear signs of diplomatic efforts by either the US or Iran to end the conflict, a pause in military strikes has raised hopes for a resolution that could ease tensions in the region and restore the smooth flow of oil shipments through the Strait of Hormuz.
A sustained decline in oil prices is only possible after a final resolution of the Middle East conflict.
This week, the focus will be on the Federal Reserve monetary policy decision on 29 July. The central bank is widely expected to keep rates unchanged. However, the chances of a rate hike this year remain high, as the US-Iran conflict has driven up energy prices, increasing inflationary risks.
“The US Federal Reserve will likely leave interest rates unchanged before raising them in September this year. However, there are speculations that the central bank could move as early as this week’s meeting in response to renewed inflationary pressures,” Jigar Trivedi, Senior Research Analyst at IndusInd Securities, noted.
Markets will closely monitor Fed Chair Kevin Warsh’s commentary for cues on the central bank’s monetary policy trajectory. The upcoming U.S. inflation and labour market data will also influence bullion prices.
Brent crude, which was near $60 per barrel at the beginning of the year, hit a 52-week high of $126.41 on 30 April. It is below $90 per barrel at the current juncture, but is still up nearly 45% year to date.
Elevated oil prices have driven concerns about sticky inflation and fuelled expectations of global interest rate hikes, weighing on gold prices, which is considered an inflation hedge, but tends to decline as higher interest rates raise the opportunity cost of holding the non-yielding metal.
Domestic spot gold prices are up 8%, while silver prices have declined 3% year-to-date, amid high volatility.
Gold and silver prices: Key levels to watch
As per Ravi Singh, Chief Research Officer at Master Capital Services, gold prices have now entered a consolidation range, with ₹1,40,000 acting as a crucial support zone, while ₹1,46,000 remains the key resistance on the upside.
“Unless gold breaks out of this range, the short-term outlook is likely to remain subdued. The preferred strategy continues to be sell on rise, especially near the ₹1,46,000 resistance area,” said Singh.
Trivedi said MCX gold August futures may rise to ₹1,44,500 per 10 grams in Monday’s trade.
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Disclaimer: This article is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
