Comex Gold Falls $134 per Ounce and Silver Drops $4 per Ounce Amid Rising Oil Prices and Strengthening US Dollar

Global Markets Reel as Tensions in Middle East Escalate

On Monday, 4 May, gold and silver prices plummeted sharply, wiping out recent gains as renewed tensions in the Middle East triggered a sharp rebound in crude oil prices, intensifying inflation concerns. A stronger US dollar also weighed on precious metals, further exacerbating the decline.

COMEX gold futures dropped $134 per troy ounce to an intraday low of $4,681, marking the lowest level in a month. This sharp correction has brought the yellow metal's year-to-date gains down to 4.50%, while from its yearly high, gold is now lower by 24.5%. Silver futures fell $4 to $72, erasing most of their recent gains.

The escalation of tensions in West Asia was sparked by Iran's semi-official Fars news agency reporting that two missiles had struck a US warship near the port of Jask, located at the southern entrance to the Strait of Hormuz, where Iran's navy maintains a base. However, US Central Command denied the report, stating that no U.S. Navy ships had been struck.

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The renewed tensions have dimmed hopes for a swift resolution to energy supply disruptions, which have been fueling inflationary pressures and raising the likelihood of higher interest rates. As a result, many global brokerage firms are now expecting no rate cuts from the Federal Reserve this year. Last week, the Fed left rates unchanged in its most divided decision since 1992 amid deepening concerns about higher energy prices filtering through the economy.

Federal Reserve's Decision to Leave Rates Unchanged May Impact Interest Rates

Bullion is traditionally viewed as an inflation hedge; however, higher interest rates reduce its appeal as a non-yielding asset. The rebound in the US dollar index is also impacting the metals rally, as a stronger dollar makes dollar-denominated commodities more expensive for holders of other currencies. The index rose to 98.4, rebounding from the near two-month lows touched last week.

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

Going ahead, investors' focus will be on several speeches from Federal Reserve officials and a slate of key economic data releases, including the closely watched jobs report. The MCX gold futures contract also fell, breaking below ₹1.49 lakh, dropping to ₹1,48,760 per 10 grams, while the silver futures contract crashed ₹9,824 per kilogram to the day's low of ₹2,41,113.