Gold Prices Fall Amid Strengthening US Dollar and Rising Rate Fears

Precious Metals Trade Lower Amid Geopolitical Tensions and Rebound in US Dollar

Precious metals traded lower on Thursday, May 14, as traders remained cautious amid ongoing geopolitical developments involving Iran and the summit between Chinese President Xi Jinping and US President Donald Trump. The US dollar's rebound also weighed on precious metals, with Comex gold erasing its opening gains to fall $35 per ounce to the day's low of $4,671, while Comex silver slipped sharply by $5 per troy ounce to a low of $84.36.

Market Analysis

However, silver remained above the $80 mark for the fifth consecutive session. If losses in the white metal persist through the close, it would mark silver's biggest intraday decline since April 21. The recent price movements of gold and silver have been diverging, with gold remaining under pressure after US inflation data reinforced expectations that the US Federal Reserve could maintain a tighter monetary policy stance. Higher interest rates are generally negative for gold because the metal does not offer any yield. In contrast, silver has remained relatively resilient.

Read also: FirstClub Secures $55 Million in Funding from Peak XV, Sofina, and Other Investors 9 Months After $22 Million Series A Round

Recent Performance

Comex silver has closed higher in six of the last seven sessions, gaining a cumulative 21.5%. In the previous session, it briefly touched $90, its highest level in two months, amid rising supply concerns and growing industrial demand. The yellow metal has gained a modest 1.5% so far in May, while silver has surged 16% during the same period.

Dollar Index and Economic Front

The dollar index continued to build on gains, climbing to 98.6 against a basket of currencies, marking the highest level in two weeks. On the economic front, US retail sales rose for a third straight month in April, signaling continued consumer resilience despite sharply higher fuel prices. Retail purchases increased 0.5% last month after a revised 1.6% gain in March, according to a Bloomberg report citing the Commerce Department.

Read also: RBI Policy Preview: A Cautionary Wait Ahead

Interest Rate Expectations

Following stronger-than-expected consumer and producer price data, markets have largely priced out US interest rate cuts this year, with traders now assigning nearly a 30% probability of a rate hike by December. Meanwhile, Xi reportedly told Trump that trade talks were making progress at the start of their two-day summit on Thursday but cautioned that disagreements over Taiwan could push relations down a dangerous path and potentially lead to conflict. However, reports said the US summary of the talks made no mention of Taiwan.

Domestic Market

In the domestic market, the near-month gold futures contract on Multi Commodity Exchange of India (MCX) fell from the day's high to ₹1,61,027 per 10 grams, down ₹1,159 from the previous close of ₹1,62,186, while silver also dropped ₹13,433 to the day's low of ₹2,86,805 per kilogram. Both gold and silver had closed Wednesday's session with gains of 2% and 7%, respectively, after the Indian government raised import tariffs on gold and silver to 15% from 6% in an effort to protect foreign exchange reserves.