Gold and Silver Prices Decline Amid Inflation Concerns and Strengthening US Dollar

Precious Metals Suffer Sharp Decline as US Dollar Strengthens

On Friday, 15 May, precious metals continued to drift lower as a strengthening US dollar and persistent US inflation dampened expectations of near-term Federal Reserve rate cuts. Traders appeared to be booking profits following the recent rally that had pushed silver to multi-month highs.

Comex Gold Prices Drop to Two-Week Low

Comex gold prices dropped $171 per troy ounce, hitting a two-week low and extending losses for the second straight session. This sharp decline has pushed gold down 4.15% for the week. Meanwhile, silver plunged even further, falling $9.16 per troy ounce to the day's low of $76.17 per ounce.

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Earlier this week, silver reached the highest level in two months. However, the sharp decline on Friday has trimmed the white metal's weekly gains to a modest 2%. The recent rally in silver has been largely erased, with the metal falling below its previous high of $81.33, which was set two months ago.

US Consumer Prices Reach Multi-Year Highs

US consumer prices climbed to multi-year highs in April, dampening hopes of Federal Reserve rate cuts and boosting demand for the dollar and other yield-bearing assets. This has made bullion less attractive to investors. The sharp energy-driven increases in April producer and consumer inflation have largely faded expectations for US interest rate cuts, according to CME Group's FedWatch tool.

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Benchmark 10-Year US Treasury Yields Climb Close to One-Year Highs

Benchmark 10-year US Treasury yields climbed close to one-year highs, raising the opportunity cost of holding non-yielding assets such as gold. This has weighed heavily on sentiment, leading to a decline in precious metal prices.

MCX Gold and Silver Prices Track International Market

Tracking losses in the international market, the near-month gold futures contract on MCX dropped ₹3,828 per 10 grams to the day's low of ₹1,58,150. However, the yellow metal remains on track to close the week with gains of over 3%, as domestic prices moved higher after the government increased customs duty on precious metals. Silver futures on MCX fell even more sharply, declining ₹22,598 per kilogram to hit the day's low of ₹2,68,504, marking a fall of ₹36,387 from Wednesday's high of ₹3,04,891.