Bullion Demand Falters Amid Ceasefire and Strengthening US Dollar

Gold Prices Fall Amid US-Iran Ceasefire Optimism

The two-week Iran-US ceasefire may have softened safe-haven demand for gold in the near term, but uncertainty persists amid the blockade of the Strait of Hormuz and the collapse of peace talks between the two warring sides.

Gold prices on the Multi Commodity Exchange (MCX) fell sharply on April 13 to a low of Rs 1,51,500 per 10 grams, but recovered some of the losses to end the day at Rs 1,51,983, up 0.06 percent from the previous close. Silver, on the other hand, fell 1.14 percent to Rs 2,40,499 a kilogram.

Despite the initial optimism following the start of the 14-day US-Iran ceasefire last week, gold prices on the MCX closed up 2 percent, while silver climbed 4 percent, bolstered by a short-term weakening of the US dollar.

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Market Trends

The near-term upside for gold prices could be limited if the dollar continues to strengthen. Commodity analysts say central banks' buying, positive exchange-traded fund (ETF) inflows, and retail demand, especially ahead of Akshaya Tritiya, are supportive. The metal's credibility as a safe bet remains intact.

Commodity analysts believe that gold may enter a volatile consolidation phase rather than a sustained rally as a continuation from the rise seen at the end of last week. This is because higher oil prices increase inflation expectations and support a stronger dollar, both of which tend to put pressure on gold and silver.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

The Augmont report said that the annual inflation rate in the US jumped to 3.3 percent in March, the highest since May 2024. This is up from 2.4 percent in February, primarily driven by a 12.5 percent rise in energy costs, with gasoline up 18.9 percent and fuel oil up 44.2 percent, due to the Iran war.

The rupee saw its steepest fall in two weeks on April 13 after crude climbed past $100 a barrel and supportive dollar flows dissipated. The rupee closed at 93.3750 against the dollar, down 0.7 percent, the sharpest decline since March 27, the day on which the central bank rolled out measures to curb excessive volatility.

Gold reacts sharply during geopolitical events because it is perceived as a store of value when confidence in financial markets weakens. Analysts said that the ceasefire reduced the immediate fear premium that drove the gains in the previous week. A stronger dollar, typically gold's inverse, and rising crude oil, reinforcing hawkish Fed expectations, are compressing upside. Profit booking after sharp weekly gains added further pressure.

Gold has maintained its safe-haven status during the West Asia conflict despite monetary policy headwinds. A 2 percent weekly gain, even amid ceasefire optimism, confirms institutional conviction remains strong.