Silver and Gold Prices Decline Amid Escalating Tensions Between Iran and Israel

Silver Rate Declines Amid Escalating Tensions in the Middle East

The silver rate in India declined on Friday, 5 June, as escalating tensions in the Middle East weakened hopes of a peace agreement between the United States and Iran, while rising inflation concerns strengthened expectations of higher interest rates. The MCX Silver price fell over 2% to ₹2,59,167 per kg, while the MCX Gold rate lost around 1% to ₹1,58,213 per 10 grams.

Spot silver fell 1.4% to $72.89 per ounce, while gold prices also moved lower, with spot gold declining 0.5% to $4,452.20 per ounce as of 0225 GMT. The yellow metal has fallen around 1.8% so far this week. US gold futures for August delivery slipped 0.6% to $4,478.50.

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Investor sentiment was hit after Iran-backed Hezbollah rejected a new ceasefire proposal in Lebanon, while Israel indicated that it would not withdraw its troops from the country. The developments dealt a blow to US President Donald Trump's efforts to broker a broader peace agreement with Tehran and ease tensions across the region.

The prolonged conflict has continued to disrupt energy flows through the Strait of Hormuz, a key route for global oil shipments. As a result, crude oil prices have remained elevated, reviving concerns over global inflation and increasing the likelihood that central banks may keep interest rates higher for longer or even tighten monetary policy further.

Higher interest rates are generally considered negative for precious metals because assets such as silver and gold do not offer interest income, making them less attractive when borrowing costs and bond yields rise. Markets are increasingly factoring in the possibility of tighter monetary policy. According to CME Group's FedWatch tool, traders currently see a 51% probability of a US Federal Reserve rate hike before the end of the year.

Adding to the pressure on precious metals, the US dollar remained firm. The dollar index, which measures the greenback against a basket of major currencies including the euro and yen, was little changed at 99.434 and was on course for a weekly gain of 0.5%. A stronger dollar typically makes dollar-denominated commodities more expensive for overseas buyers, weighing on demand.

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Analysts noted that growing expectations of an energy-driven inflation shock linked to the Middle East conflict are reinforcing the case for tighter monetary policy. While geopolitical uncertainty continues to provide some safe-haven support to precious metals, that benefit has been partly offset by the stronger dollar and rising rate-hike expectations.

Investors are now awaiting the release of the US nonfarm payrolls report for May later in the day, which could provide fresh clues on the strength of the labour market and the Federal Reserve's next policy move. The data is expected to play a key role in shaping the near-term outlook for silver, gold and broader financial markets.

Renisha Chainani, Head - Research at Augmont, noted that silver is consolidating within the $72–$78.50 band, with an identical tactical approach recommended. For the yellow metal, Chainani said, gold remains range-bound between $4,450 and $4,600; the preferred strategy is to buy on dips and sell into rallies.