Gold in spot transactions fell 1.1% to $4,488.99 per ounce, its lowest level since March 30, while US gold futures contracts for June delivery fell 1.5% to $4,493.30.The pressure on the yellow metal came after oil prices continued their upward rise following a drone attack on a nuclear power plant in the United Arab Emirates, which increased fears of a broader regional conflict. Saudi Arabia’s interception of three drones and the sharp warning issued by US President Donald Trump to Iran increased anxiety in the market as hopes for an end to the US-Israeli war faded.With the price of crude oil rising to its highest level in two weeks, investors were concerned that rising energy costs could spark inflation globally. This, in turn, has strengthened expectations that central banks, especially the US Federal Reserve, may keep interest rates high for longer or even tighten them further.Markets are now anticipating an increasing chance that the Fed will raise interest rates before the end of the year, with CME’s FedWatch tool showing a 50% chance of a rate hike by December.
Investors are now closely watching the minutes of the Federal Reserve’s April meeting, scheduled for later this week, for further clues about the direction US monetary policy is headed.Meanwhile, India’s foreign exchange reserves rose sharply by US$6.295 billion to US$696.988 billion in the week ended May 8, recovering from the sharp decline witnessed in the previous week.The main driver of this recovery was the significant jump in gold reserves, which increased by $5.637 billion to $120.853 billion, reflecting the growing strategic importance of bullion in India’s reserve basket during a volatile global environment.Foreign currency assets, the largest component of India’s reserves, also rose by $562 million to $552.387 billion.The recovery comes after the country’s reserves fell from a record peak of $728.494 billion reached in February, when escalating tensions in the Middle East pressured the rupee and prompted the Reserve Bank of India to intervene.The latest RBI data also showed the SDR rising to $18.873 billion, while India’s reserve position with the IMF rose to $4.875 billion.