Gold Price Drops on MCX Amid Stronger Dollar, Higher Oil Prices

Gold Prices Drop Amid Stronger Dollar and Elevated Crude Oil Prices

On Monday, 1 June, gold prices on the Multi Commodity Exchange (MCX) saw a decline in morning deals, dragged by a stronger dollar and elevated crude oil prices. Despite investors remaining focused on developments surrounding a potential US-Iran peace deal, the precious metal's prices suffered a setback.

The MCX gold August futures witnessed a 0.66% decline, trading at ₹1,59,850 per 10 grams, while the MCX silver July futures remained flat at ₹2,66,979 per kg around 9:10 am. Similarly, gold prices in the US also declined, with US gold futures dropping by 0.8% to $4,558.10 per troy ounce.

The stronger dollar index, which rose by about 0.20%, made greenback-denominated gold expensive for buyers in other currencies. The sudden surge in crude oil prices, which jumped by over 2%, exacerbated the risk of inflation remaining high and drove global monetary tightening. This persistent uncertainty over a US-Iran deal has been a major factor in keeping oil prices elevated since the end of February, driving expectations of US Federal Reserve monetary tightening.

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According to media reports, the US and Iran exchanged messages over the weekend seeking changes to a draft agreement that would extend a ceasefire and open the Strait of Hormuz, but it was unclear whether the sides were making much progress. Meanwhile, Israeli Prime Minister Benjamin Netanyahu has ordered troops to move further into Lebanon in the battle against the Iranian-backed Hezbollah militant group.

The Middle East conflict has kept oil prices elevated, driving expectations of US Federal Reserve monetary tightening. Reuters reported that Federal Reserve Vice Chair for Supervision Michelle Bowman said on Friday that the war could lead to persistent inflation that might require tighter monetary policy, while Federal Reserve Bank of Philadelphia President Anna Paulson signalled that slightly restrictive monetary policy is suitable when inflation risks are high.

Market Analysts Weigh In

Ravi Singh, Chief Research Officer (Research) at Master Capital Services, highlighted that the daily chart indicates that prices have slipped below this key short-term hurdle, keeping near-term sentiment weak. Singh pointed out that immediate support is now placed near the 21-day EMA around ₹1,54,000, and a sustained breach below this level could accelerate selling pressure towards the ₹1,52,500 to ₹1,52,000 zone.

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

On the other hand, Jigar Trivedi, Senior Research Analyst at IndusInd Securities, said that MCX gold June futures are witnessing finding strong support around ₹1,55,000 per 10 grams, while immediate resistance is placed near ₹1,57,000. He added that the intraday bias remains mildly negative unless prices sustain above the resistance zone.

Manoj Kumar Jain of Prithvifinmart Commodity Research expects gold and silver prices to remain volatile this week amid volatility in crude oil prices, the dollar index, and hopes for a US-Iran peace deal. Jain provided key levels to watch, including support and resistance levels for gold and silver prices.