Gold and Silver Prices Fluctuate as Middle East Tensions and a Strengthening Dollar Weigh on Market Direction

Global Markets Shaken by Fresh US Strikes on Iran

The precious metals market witnessed a sharp decline in Tuesday's session, with gold and silver prices erasing their intraday gains following reports of fresh US strikes on Iran. The optimism surrounding a potential peace deal in West Asia weakened, as the US dollar also rebounded, weighing on sentiment.

Comex gold, which had touched an intraday high of $4,540, lost all its gains to trade at $4,517, a decline of $60 per troy ounce. Meanwhile, silver futures dropped to $76.58 from the day's high of $79.25. The sharp decline in precious metals prices is a result of the uncertainty surrounding the future of Iran's nuclear program and control over the Strait of Hormuz.

The latest developments in the Middle East have clouded the prospects of a swift resumption in oil flows through the Strait of Hormuz, investors still appear hopeful that peace talks can progress. However, the hopes of de-escalation in the Middle East continue to be weighed down by uncertainty surrounding key disagreements.

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The fresh strikes on Iran have triggered a rebound in crude oil prices, reinforcing expectations that inflation could remain higher for longer and raising fears that central banks may hike interest rates in 2026 instead of cutting them. The sharp rise in energy prices has also dented consumer confidence, with US consumer sentiment falling to a record low in May.

Consumers now expect prices to remain elevated for a longer period, strengthening the case for tighter monetary policy ahead. Federal Reserve Governor Christopher Waller, who until recently had advocated lower rates, said the central bank should remove its "easing bias," effectively opening the door to a possible rate hike.

Fears of higher interest rates have pushed bond yields to multi-year highs in May, making non-yielding assets such as gold less attractive to investors. Precious metals witnessed sharp volatility throughout April as hopes of de-escalation, along with conflicting statements from both the US and Iran, kept prices largely directionless.

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Silver prices have remained down nearly 20% since the conflict began, while gold has declined around 15% during the same period. The dollar rebounded modestly from the day's low to 99 on Tuesday, making dollar-priced commodities a little expensive for other currency holders.

Tracking weakness in the international market, near-month gold futures on the MCX dropped ₹796 per 10 grams to touch the day's low of ₹1,57,661, while silver futures on the MCX also fell by nearly ₹6,000 per kilogram to ₹2,69,645. The white metal had closed higher last week, extending its weekly winning streak to four and taking the cumulative gain to 11%. The yellow metal also extended its weekly winning run to three, delivering cumulative gains of 5%.