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

Precious Metals Witness Renewed Selling Pressure Amid Inflation Concerns

The global precious metals market witnessed renewed selling pressure on Thursday, 21 May, as the rebound in crude oil prices heightened inflation concerns, boosting expectations of further US rate hikes and lifting Treasury yields and the dollar. This added pressure on safe-haven assets, leading to a decline in gold and silver prices.

Global Market Trends

Comex gold fell by $47 per troy ounce to an intraday low of $4,488, while silver futures declined by $1.5 per ounce to $74.69. Since the start of the war in late February, gold has lost 14% and silver has been down by 18.3%. The decline in precious metals prices can be attributed to the increased expectations of further US rate hikes, which has led to a rise in Treasury yields and the dollar.

Read also: Gold and Silver Prices Decline Amid Strengthening Dollar and Inflation Concerns

Regional Developments

Hopes of potential de-escalation in West Asia were once again tested after Iran's Supreme Leader said the country must retain its uranium, tempering optimism that the warring sides were moving closer to a deal to reopen the Strait of Hormuz. The Ayatollah's order could complicate talks aimed at ending the US-Israeli conflict involving Iran, reinforcing fears that supply disruptions through the Strait of Hormuz could persist for longer.

US Federal Reserve and Rate Hikes

The US Federal Reserve's latest policy meeting minutes showed that most officials believe a rate hike this year could still be warranted if inflation remains above the Fed's 2% target. This has led to increased expectations of a rate hike, with traders now seeing a 58% chance of at least one 25-basis-point interest rate hike by the US Federal Reserve this year, compared with 48% a day earlier.

Read also: Gold and Silver Prices in India: A Review of Current Rates Across Major Cities

Indian Market Trends

The decline in global precious metals prices was reflected in the Indian market as well. The near-month gold futures contract on MCX fell by ₹1,464 per 10 grams to ₹1,58,542. The silver futures contract on MCX also declined by ₹5,515 per kilogram to hit the day's low of ₹2,68,750, completely erasing Wednesday's gain of ₹4,146.