Prices will be driven by inflation, the Middle East war, and more
Precious metals are expected to remain under pressure next week, analysts said, as investors weigh geopolitical uncertainty in the Middle East against upcoming inflation data and other economic indicators that could shape expectations on global interest rates.The recent escalation between the United States and Iran has renewed concerns about energy supplies after Tehran announced the closure of the Strait of Hormuz following an attack on a ship it claimed was traveling via an unauthorized route. The conflict expanded after US strikes led to retaliatory attacks by Iran on US-linked facilities in the UAE, Kuwait and Bahrain.While geopolitical tensions typically support safe-haven gold demand, analysts said the current environment could have a mixed impact.
A continued rise in crude oil prices could increase inflation, strengthen the US dollar and push Treasury yields higher, reducing the attractiveness of non-yielding assets such as gold and silver.“Gold and silver are still in a corrective phase. The trend will largely depend on how the US-Iran conflict develops. Any significant escalation is likely to push oil prices further and support the US dollar and Treasury yields,” said Pranav Mir, senior vice president of commodities and currency research at JM Financial Services.
Aside from geopolitical developments, investors are awaiting inflation readings from the US, India and the Eurozone, which could provide new signals about the policy stance of major central banks.Locally, bullion prices ended the week sharply lower. MCX gold futures for August settlement fell by Rs 3,900, or 2.65 per cent, to Rs 1.43 lakh per 10 gram, while silver futures for September fell by Rs 14,746, or 6.2 per cent, to Rs 2.22 lakh per kg.The weakness reflects global trends, with Comex gold falling 0.3 percent to $4,113.7 an ounce, and silver losing 1.5 percent to $60.16 an ounce.According to Jatin Trivedi, vice president and research analyst, commodities and currencies at LKP Securities, gold struggled to hold on to short-term gains as investors continued to book profits.He said the strength of the US dollar, rising crude oil prices and expectations that interest rates could remain high for a longer period kept sentiment low.
Although the rupee decline provided some support to domestic gold prices, it was not enough to offset weakness in overseas markets.Beyond inflation data, traders will also track US retail sales, housing numbers and weekly unemployment claims for clues about the Fed’s next move. Chinese economic data, including GDP, industrial production, trade and credit growth, will also be closely watched for their impact on the broader commodities market.Analysts believe that bullion is likely to remain range-bound until markets receive a stronger stimulus, either through a major shift in geopolitical developments or new signals about the outlook for global interest rates.