Gold and silver prices extended their decline for a second straight session on Monday, 13 July, as escalating tensions in the Middle East fuelled concerns over persistent inflation and the prospect of higher US interest rates. A stronger US dollar also weighed on sentiment, pushing both precious metals deeper into last week’s losses.
Comex gold futures dropped another $104 per troy ounce to an intraday low of $4,009, while Comex silver futures fell $2.34 to $57.82 per troy ounce.
The renewed escalation in West Asia triggered a sharp rebound in crude oil prices, reinforcing expectations that the US Federal Reserve may have to keep interest rates higher for longer to contain inflation. Higher interest rates typically reduce the appeal of non-yielding assets such as gold.
Both Brent and WTI crude futures surged more than 4% after the US and Iran exchanged missile and drone attacks over the weekend, intensifying hostilities that resumed last week. The conflict has disrupted shipping through the Strait of Hormuz, one of the world’s most critical oil transit routes, raising concerns over global energy supplies.
The Strait of Hormuz has once again emerged as the focal point of the conflict, with both the US and Iran issuing conflicting statements over control of the strategic waterway and whether commercial shipping can safely pass through it.
US President Donald Trump on Monday said that the United States was “taking over” security of the Strait of Hormuz and would be compensated for protecting the route. Iran, however, rejected the claim, with its military warning that it would not allow the US to interfere in the vital shipping corridor and cautioning Gulf nations against cooperating with Washington.
The US military said it struck dozens of targets on Monday, while Iran’s Revolutionary Guards claimed to have launched fresh retaliatory attacks targeting Bahrain, Jordan, Kuwait and Oman.
Higher crude oil prices could fuel inflation by increasing transportation and energy costs, potentially prompting central banks to maintain higher interest rates or tighten monetary policy further.
According to the CME FedWatch Tool, traders currently assign a 69% probability to a Federal Reserve interest rate hike in September, as per the Reuters report.
Investors will now turn their attention to Fed Chair Kevin Warsh’s testimony before Congress on Tuesday for clues on the monetary policy outlook.
The market will also closely watch key US economic data this week, including the Consumer Price Index (CPI), Producer Price Index (PPI), retail sales, and weekly jobless claims.
MCX gold, silver mirror global weakness
Tracking weakness in international markets, the near-month MCX gold futures contract ₹3,000 per 10 grams”>fell nearly ₹3,000 per 10 grams to an intraday low of ₹1,40,873. The yellow metal has closed lower in four of the last five sessions, resulting in a 2.64% decline over the period.
The MCX silver futures contract also remained under pressure, falling nearly ₹5,387 per kg to an intraday low of ₹2,17,277. The latest decline came after the metal had fallen ₹3,713 in the previous session, widening its losses for July to around ₹9,325 per kg.
Disclaimer: We advise investors to check with certified experts before making any investment decisions.
