US Dollar Rally Dents Gold, Silver Prices Amid Safe-Haven Demand Decline

Precious Metals Retreat Amid US Dollar Strength and Rising Tensions in the Middle East

Market Update - March 3, 2024

Gold prices have dropped $230 per troy ounce to $5,081 per ounce on the Comex, weighed down by a strong US dollar. The US dollar index has jumped to 99.38, its highest level since January 20, supported by safe-haven flows. Silver futures have also declined, with the March contract crashing $10.79 per troy ounce to reach a day's low of $78.06.

The US Federal Reserve rate reduction expectations have been pushed back to September from earlier forecasts of July, although two 25-basis-point cuts are still priced in. The rising energy prices and inflation concerns are contributing to the strong US dollar, which may keep borrowing costs elevated and dampen appetite for non-yielding metals like gold.

Market Impact

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

The ongoing conflict in the Middle East has intensified, with the US, Israel, and Iran engaging in attacks on each other. The conflict has sent crude oil prices to multi-month highs, while Iran has stepped up its attacks on energy infrastructure and vowed to close the Strait of Hormuz. The White House has indicated that the conflict is likely to intensify in the coming days.

Domestic Market

In the domestic market, MCX gold futures have fallen ₹6,425 to the day's low of ₹1,59,649 per 10 grams, erasing all the gains made in the previous two sessions. The March silver futures contract has declined sharply, falling ₹18,471 per kilogram to the day's low of ₹2,60,010.