Gold, silver prices decline on MCX as US-Iran tensions fuel Fed rate hike expectations

Gold and silver prices declined on the MCX in the morning trade on Thursday, 9 July, as fresh tensions between the US and Iran fuelled inflation concerns and expectations of aggressive monetary tightening this year.

MCX gold August futures were 0.30% down at ₹1,43,275, while MCX silver September futures were 0.76% down at ₹2,21,749 per kg around 9:15 am.

International gold prices also declined as fresh hostilities between the US and Iran revived concerns over higher inflation and interest rate hikes in the US.

Gold is considered a hedge against inflation, but it tends to decline during times of monetary tightening because it is a non-yielding asset.

The fragile ceasefire between the US and Iran collapsed as US President Donald Trump, as per reports, declared that the memorandum of understanding to end the war with Iran was "over". This reignited fears of inflation flaring up.

Trump warned that the US bombing of Iran would increase significantly if the Islamic Republic continues to attack ships in the Strait of Hormuz.

Crude oil benchmark Brent Crude jumped over 1% to trade near the $78 per barrel level.

Meanwhile, the minutes of US Federal Reserve's June meeting showed that the Middle East conflict dominated the central bank's discussion and some US Fed officials saw reasons to hike rates due to elevated inflation.

"Gold prices declined due to concerns that the fresh conflict in the Middle East could disrupt energy supplies and intensify inflationary pressures. Meanwhile, minutes from the Fed's June meeting showed that officials expressed growing concern about inflation," Jigar Trivedi, Senior Research Analyst at IndusInd Securities, noted.

Trivedi expects MCXX gold August futures to slip to ₹1,43,000 per 10 grams due to weak global market trends.

Manoj Kumar Jain of Prithvifinmart Commodity Research said gold has support at $4,055 and $4,010, while resistance is at $4,122 and $4,150 per troy ounce, and silver has support at $57 and $55.50, while resistance is at $60 and $61.40 per troy ounce in today’s session.

On the MCX, Jain said gold has support at ₹1,43,100 and ₹1,42,200 and resistance at ₹1,44,400 and ₹1,45,150, while silver has support at ₹2,20,000 and ₹2,16,600 and resistance at ₹2,26,600 and ₹2,30,000.

"We suggest traders must avoid buying positions in gold and silver, but long-term investors could buy and accumulate in a staggered way in this market fall," said Jain.

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Disclaimer: This article is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.