Gold and silver prices rose sharply on Monday after hopes of a peace agreement between the United States and Iran eased concerns over prolonged geopolitical tensions.
The rebound came after both precious metals had witnessed a steep decline in recent weeks amid volatility linked to the conflict and movements in crude oil prices.
Gold Rises More Than 2 per cent
Spot gold climbed over 2 per cent on Monday and touched its highest level since June 9. Gold prices rose after US and Iranian officials said they had reached a preliminary framework agreement to end their conflict and reopen the Strait of Hormuz.
The proposed agreement also helped cool global crude oil prices, which fell more than 4 per cent, while the US dollar weakened to a 10-day low. A weaker dollar makes gold cheaper for holders of other currencies, supporting demand for the precious metal. US gold futures for August delivery also gained around 2 per cent during trading.
Silver Surges as Precious Metals
Silver prices also recorded strong gains, rising more than 3 per cent in international markets. Other precious metals joined the rally, with platinum and palladium advancing over 3 per cent.
The gains came after a prolonged correction in gold and silver prices. Market participants said hopes of easing geopolitical tensions encouraged buying in precious metals after recent weakness.
In domestic markets, Gold August futures rose Rs 3,301 or 2.19 per cent to open at Rs 1,53,829 per 10 grams on Monday, compared with the previous close of Rs 1,50,528. The contract later touched an intraday high of Rs 1,53,829, remaining up 2.19 per cent.
Silver July futures opened higher by Rs 5,377 or 2.18 per cent at Rs 2,51,563 per kg against the previous close of Rs 2,46,186. The contract further climbed to an intraday high of Rs 2,53,345, up Rs 7,159 or 2.91 per cent from the previous close.
However, both metals remained lower on a weekly and monthly basis despite Monday’s recovery.
Crude Oil, Dollar Weakness Support Bullion Prices
Analysts said the correction in crude oil prices and weakness in the US dollar provided support to gold and silver. Gold and silver had faced pressure during the conflict period as rising oil prices fuelled inflation concerns and increased expectations that interest rates could remain elevated for longer.
Lower oil prices are now easing some of those concerns. Market participants are also assessing the possible impact on future US Federal Reserve policy decisions.
Bullion typically benefits when expectations of aggressive interest rate increases decline, as gold and silver do not offer any yield.
Expert Sees Further Volatility Ahead
According to Manoj Jain, Director, Prithvi Finmart, precious metals recovered from their recent lows after signs of progress in a US-Iran peace agreement.
“Gold and silver gained amid US and Iran peace deal hopes and profit taking in crude oil and the dollar index. Trend volatile,” Jain said. He said gold and silver were trading in an extremely oversold zone and a technical recovery was expected.
“Gold and silver recovered from their lows last week after the US President said that the US and Iran had agreed to sign a peace deal. Crude oil prices sharply corrected after his statements, and the dollar index and the US 10-year bond yields also cooled off,” Jain said.
He added that lower crude oil prices could ease fears of further US Federal Reserve rate hikes and provide support to precious metals.
Fed Policy Meeting in Focus
Investors are now awaiting the outcome of the US Federal Reserve’s monetary policy meeting later this week for further direction. Jain said gold and silver prices are likely to remain volatile due to fluctuations in crude oil prices, movements in the dollar index and developments related to the Federal Reserve.
For MCX Gold, he sees support at Rs 1,49,700-Rs 1,48,650 per 10 grams and resistance at Rs 1,51,150-Rs 1,52,200. For MCX Silver, support is placed at Rs 2,43,300-Rs 2,40,000 per kg, while resistance is seen at Rs 2,49,100-Rs 2,52,500.
Analysts said traders will continue to monitor geopolitical developments, oil prices and central bank signals, which are expected to remain key drivers for gold and silver prices in the near term.
