Gold and silver prices traded higher on Monday, 25 May, as hopes of a peace deal to end the Iran war boosted demand for precious metals, while a softer US dollar and a drop in crude oil prices eased concerns over inflation and higher-for-longer interest rates.
MCX gold near-month futures jumped ₹821 per 10 grams to hit the day’s high of ₹1,59,500, attempting to partially recover from recent losses, while silver futures also gained sharply by ₹5,399 per kilogram to touch the day’s high of ₹2,77,245.
Iran peace hopes, Fed rate fears keep bullion volatile
The market turned optimistic after US President Donald Trump said on Saturday that a deal with Iran over the conflict, including reopening the Strait of Hormuz, had been “largely negotiated” following discussions with Israel and other allies in the region.
However, Trump added that Washington would keep its blockade of the Strait of Hormuz in place until a formal agreement is reached, stating that he would not “rush” into a deal. The two sides remain divided on several key issues that need to be resolved to end the nearly three-month-old conflict.
The reopening of the Strait of Hormuz is expected to play a crucial role in determining the direction of oil prices. Its closure due to the conflict has disrupted the movement of oil tankers from the Persian Gulf, affecting crude supplies to customers worldwide. Countries such as India, which import most of their oil through the strait, have been particularly impacted.
The Iran conflict and the dual blockade around Hormuz have severely disrupted global energy markets, forcing Middle Eastern producers to halt millions of barrels per day of crude output.
Precious metals witnessed sharp volatility throughout April as hopes of potential de-escalation, along with conflicting statements from both the US and Iran, kept prices directionless.
The surge in crude oil prices has strengthened expectations that the US Federal Reserve could raise interest rates in 2026 instead of cutting them, pushing bond yields to multi-year highs and making gold less attractive to investors.
Gold, a non-yielding asset, tends to perform better in a low-interest-rate environment.
The US 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 central bank’s 2% target.
Meanwhile, investors also continued to assess the outlook for Federal Reserve policy after Governor Christopher Waller signalled that he no longer believed the central bank should retain an easing bias in its policy statement.
Since the start of the conflict, MCX gold prices have declined more than 10%, while silver prices have fallen even more sharply, losing nearly 20%. Although both metals witnessed a rebound during the second week of May, the recovery was largely driven by an increase in customs duty.
Disclaimer: We advise investors to check with certified experts before making any investment decisions.
