Gold and silver prices declined in both international and domestic markets on Monday, even as crude oil prices surged amid escalating geopolitical tensions in the Middle East due to the ongoing US-Iran war.
In the global market, spot gold price fell 1.7% to $5,082.51 per ounce, while US gold futures for April delivery dropped 1.4% to $5,099.40 per ounce. Spot silver prices also declined, slipping 2.2% to $82.50 per ounce.
In the domestic market, MCX gold rate today fell 0.96% to ₹1,60,077 per 10 grams. Meanwhile, MCX silver prices declined 2.67% to ₹2,61,135 per kg.
The decline in gold and silver prices comes despite intensifying geopolitical tensions, which typically boost demand for safe-haven assets such as precious metals. The conflict involving the United States and Israel against Iran has escalated, raising concerns about a broader regional war in the Middle East.
The ongoing conflict has also disrupted energy markets. Several major Middle Eastern oil producers have reportedly curtailed supplies amid fears of prolonged disruption to shipping routes through the Strait of Hormuz. As a result, crude oil prices have surged more than 20%, crossing the $110 per barrel mark.
However, despite the rising geopolitical risks and a sharp spike in crude oil prices, gold and silver prices have moved lower. Here are the key factors behind the decline in precious metal prices despite heightened global tensions.
Strong US Dollar
A strengthening US dollar has put pressure on gold and silver prices, limiting safe-haven inflows despite rising geopolitical tensions.
The dollar climbed to a more-than-three-month high, making bullion more expensive for holders of other currencies. At the same time, US 10-year Treasury yields rose to a one-month high, increasing the opportunity cost of holding non-yielding assets such as gold.
Against the surging greenback, the euro and British pound fell roughly 1%, while the Australian dollar and even the safe-haven Swiss franc also weakened, underscoring the dollar’s broad-based strength.
Rate Cut Expectations Fade
The sharp rise in crude oil prices and energy costs fuelled inflation concerns and further dimmed the prospects for near-term reductions in interest rates by the US Federal Reserve.
Investors expect the US Federal Reserve to keep interest rates steady at the end of its two-day meeting on March 18, as per CME Group’s FedWatch tool. The odds of a June hold, which were below 43% last week, climbed to more than 51%. Bullion tends to thrive in a low-interest-rate environment as it is a non-yielding asset.
Profit Booking After Strong Rally
Escalating US-Iran war in the Middle East have rattled global investors and triggered heavy selling in risk assets. Equity markets across the world have witnessed sharp losses since the start of the US-Israel-Iran war.
Despite the recent pullback, gold prices remain about 54% higher year-to-date, supported by persistent geopolitical risks, central bank purchases, and strong safe-haven demand linked to fiscal uncertainties.
However, the steep rally has also encouraged investors to book profits. Losses in equity markets have forced some investors to liquidate profitable gold and silver positions to manage liquidity needs.
Central Banks Gold Selling Rumours
Market rumours suggesting that some central banks may be selling gold to raise liquidity have also weighed on investor sentiment, analysts said.
Meanwhile, central bank gold purchases slowed at the start of the year, according to a recent report by the World Gold Council. Net purchases in January totalled just 5 tonnes, compared with the previous 12-month average of 27 tonnes, the report showed.
Rising Caution in Financial Markets
Growing institutional concerns have further increased caution across financial markets.
Recently, BlackRock Inc. restricted withdrawals from one of its largest private credit funds after redemption requests surged, highlighting investor anxiety within the $1.8 trillion private credit industry.
The asset manager’s $26 billion HPS Corporate Lending Fund said shareholders requested redemptions amounting to 9.3% of shares. However, the company capped repurchases at 5%. While the requested withdrawals would have totalled about $1.2 billion, investors will receive roughly $620 million, according to Bloomberg estimates.
“Market rumors of central banks selling gold to raise liquidity have also weakened investor sentiment. Institutional concerns, including news around BlackRock payout delays, increased caution in financial markets. Unlike 2008 or 2020, gold prices had already rallied sharply earlier, limiting fresh inflows. Low open interest and high volatility indicate a wait-and-watch stance among institutions,” said Ajay Kedia, Director of Kedia Advisory.
Gold Price Outlook
COMEX gold price is trading in the $5,100 zone after surging to previous all-time highs, following which the metal entered a corrective phase.
“The broader bullish framework remains intact, supported by sustained momentum and strong breakout continuation through previous consolidation zones. Gold prices continue to hold firmly above key moving averages and the resistance zone of the prior all-time high, gradually edging higher and signaling strengthening momentum. Strong buying interest is visible in the $5,000 support band, while a break below this band could trigger further downside, potentially dragging prices toward the $4,900 level,” said Ponmudi R, CEO of Enrich Money.
According to him, as long as gold price holds above the $5,000 support band, the bullish trend remains dominant, while a sustained breakout above $5,400 – $5,600 could open the path toward fresh record highs.
MCX gold prices have seen robust buying interest in the ₹1,50,000 – ₹1,55,000 demand band following the recent surge driven by Middle East tensions.
“A hold above this base, followed by a sustained breakout above ₹1,70,000, may revive momentum toward ₹1,75,000 – ₹1,80,000, preserving a bullish medium-term perspective. Support for MCX gold price is seen around ₹1,57,000 level,” said Ponmudi R.
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.
