Precious metals extended their losses on Wednesday, 8 July, as renewed tensions in the Middle East boosted the US dollar and weighed on investor sentiment, putting gold and silver on track for a second consecutive session of declines.
COMEX gold futures fell another $107 per troy ounce to an intraday low of $4,050, while silver futures dropped nearly $3 per troy ounce, slipping below the $60 mark to an intraday low of $58.42. In the previous session, gold and silver had settled 0.24% and 1.60% lower, respectively.
Tensions in West Asia, which had eased in recent weeks, flared up again after the US launched fresh strikes on Iran, saying the move was in response to Tehran’s alleged attacks on ships transiting the Strait of Hormuz. Ahead of the strikes, Washington also revoked a licence that had authorised the sale of Iranian oil in international markets.
In retaliation, Iran reportedly resumed attacks in the region, launching missiles at US military sites in Bahrain and Kuwait. Both sides have accused each other of violating the ceasefire agreement.
US President Donald Trump further escalated tensions by warning that the US was preparing for another night of strikes, hours after declaring the ceasefire and memorandum of understanding (MoU) with Iran effectively over.
Trump also renewed earlier threats to target Iran’s civilian infrastructure, including power plants and desalination facilities, and to seize Kharg Island, home to most of the country’s oil export infrastructure.
Speaking in Ankara, Turkey, on the sidelines of a NATO summit, Trump said the strikes were a continued response to Iran’s alleged attacks on commercial vessels transiting the Strait of Hormuz, according to the Associated Press.
Following the latest escalation, crude oil prices resumed their rally after retreating to pre-war levels earlier this month.
Higher energy prices can fuel inflation and potentially force central banks to keep interest rates higher for longer. While gold is widely regarded as a hedge against inflation, the non-yielding metal tends to lose its appeal in a high-interest-rate environment.
Meanwhile, the US dollar index is hovering at a one-week high as investors assess the latest escalation in Middle East tensions
Traders are now pricing in a 67% probability of a US interest rate hike in September, up from 62% a day earlier, according to the CME FedWatch Tool.
Investors are also awaiting the minutes of the Federal Open Market Committee’s 16-17 June meeting, due at 2:00 PM EDT (1800 GMT), for further clues on the Federal Reserve’s monetary policy outlook.
MCX gold and silver remain lower
Tracking weakness in the international market, the near-month ₹2,779 per 10 grams”>gold futures contract fell ₹2,779 per 10 grams to an intraday low of ₹1,42,613. The near-month silver futures contract also declined by nearly ₹10,000 per kg to touch an intraday low of ₹2,21,076.
“Market participants will now focus on the Federal Reserve’s meeting minutes and further developments in the US-Iran conflict, which are expected to drive the next move in bullion prices. Technically, gold is expected to trade in the ₹1,41,000-1,45,000 range, with volatility likely to remain elevated,” said Jateen Trivedi, Vice President and Research Analyst – Commodity & Currency, LKP Securities.
(With inputs from AP and Reuters)
Disclaimer: We advise investors to check with certified experts before making any investment decisions.
