Gold, Silver Prices Struggle Amid Escalating US-Iran Tensions: 5 Factors at Play

Global Market Update: Precious Metals Decline Amid Escalating Geopolitical Tensions

Key Statistics:

• Spot gold price: $5,082.51 per ounce (down 1.7%)
• US gold futures for April delivery: $5,099.40 per ounce (down 1.4%)
• Spot silver price: $82.50 per ounce (down 2.2%)
• MCX gold rate: ₹1,60,077 per 10 grams (down 0.96%)
• MCX silver price: ₹2,61,135 per kg (down 2.67%)

Market Analysis

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The global precious metals market experienced a decline in both gold and silver prices on Monday, despite the escalating geopolitical tensions in the Middle East. The conflict between the United States and Iran has raised concerns about a broader regional war, typically boosting demand for safe-haven assets such as precious metals. However, the strengthening US Dollar and expectations of a rate cut fade have put pressure on gold and silver prices.

The US Dollar climbed to a more-than-three-month high, making bullion more expensive for holders of other currencies. The dollar's broad-based strength has also been reflected in the decline of the euro and British pound by roughly 1%. The rise in US 10-year Treasury yields has increased the opportunity cost of holding non-yielding assets such as gold.

The sharp rise in crude oil prices has fueled inflation concerns, further dimming the prospects for near-term reductions in interest rates by the US Federal Reserve. Investors expect the Fed to keep interest rates steady at the end of its two-day meeting on March 18.

Rumors of Central Banks Selling Gold have also weighed on investor sentiment, analysts said. Market rumors of central banks selling gold to raise liquidity have weakened investor sentiment. Additionally, central bank gold purchases slowed at the start of the year, according to a recent report by the World Gold Council.

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Profit Booking After Strong Rally has also contributed to the decline in gold prices. The steep rally has encouraged investors to book profits, particularly after the recent pullback in equity markets. Some investors have liquidated profitable gold and silver positions to manage liquidity needs.

Outlook

The broader bullish framework for gold prices remains intact, supported by sustained momentum and strong safe-haven demand. However, the market is expected to remain cautious due to growing institutional concerns and rumors of central banks selling gold.