Gold and Silver Prices Decline Amid Escalating US-Iran Tensions

Global Precious Metals Suffer Sharp Losses Amid Escalating Middle East Tensions

Tensions in the Middle East resurfaced on Monday, 13 April, following the collapse of peace talks between the US and Iran over the weekend, fueling inflation concerns and casting a cloud over the outlook for future interest rate cuts. In response, precious metals traded with sharp losses in Monday's session, with Comex April gold futures crashing $161 per troy ounce to a day's low of $4,626, erasing most of their recent gains and putting them on track for a second consecutive loss.

May silver futures on Comex also reversed recent gains, falling $4 per troy ounce to touch the day's low of $72.54 earlier in the session. Investors had hoped that the US and Iran could draft a peace deal to end the over-month-long conflict in West Asia, but both countries failed to reach a consensus.

The failure of the peace talks has spurred a surge in crude oil prices, which has likely renewed inflationary pressures and heightened concerns over potential central bank rate hikes that could diminish the appeal of non-interest-bearing precious metals. Meanwhile, US President Donald Trump warned that the US would start "blockading any ships trying to enter or leave the Strait of Hormuz," which has further heightened tensions in the region.

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The metals, which had shown signs of a rebound amid hopes of easing tensions, are likely to witness volatility going ahead as Iranian officials have also threatened retaliation, indicating that tensions in the region could escalate again. The renewed tensions have also boosted the US dollar index, which gained over 2% against a basket of currencies, making dollar-denominated precious metals more expensive for holders of non-dollar currencies.

Precious metals are caught between geopolitical tensions and fears of monetary tightening, as major central banks have already sounded caution over the impact of a potential closure of the Strait of Hormuz on consumer prices. US inflation has climbed to 3.3%, the highest since May 2024, with the monthly index rising 0.9%, the steepest increase since mid-2022.

In the domestic market, near-month MCX gold futures dropped ₹1,397 to hit the day's low of ₹1,51,255 earlier in the day. The yellow metal closed last week with a 2% gain, extending its winning run to a second week, but it still trades below its March highs. Silver futures on MCX also fell by nearly ₹6,900 per kilogram, reaching ₹2,36,452. Like gold, the white metal also finished the last two weeks on a higher note but still remains below its March high of ₹2.62 lakh.

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