Gold and silver prices faced a significant downward trend on Wednesday, as investors reacted to escalating geopolitical risks and rising economic uncertainty. MCX gold saw a sharp decline, dropping below the 1.45 lakh rupee mark, while silver prices fell by approximately 1,000 rupees. The precious metals market remains under pressure as tensions between the United States and Iran threaten global stability.
Impact of Rising Crude Oil Prices
The conflict intensified after the US military launched new airstrikes against Iran, following allegations that Tehran had attacked commercial vessels transiting through the Strait of Hormuz. This development sent crude oil prices soaring by nearly 3 percent, pushing US WTI Crude Oil above 72 dollars and Brent Crude to near 76 dollars per barrel. Iran has denounced these actions as a direct violation of the ceasefire deal established in June and has issued warnings of further consequences. Reports indicate that US airstrikes targeted the strategic Iranian port city of Bandar Abbas, alongside the imposition of tightened economic sanctions on Tehran.
Fed Policy and Inflationary Pressure
The sudden spike in oil prices has reignited fears of sustained inflationary pressure. Investors are now closely monitoring the minutes of the Federal Reserve's June meeting for clues regarding the central bank's policy path. Market participants have adjusted their expectations, with a 50 percent probability now assigned to a Federal Reserve rate hike in September, rising from roughly 46 percent just a day prior. Economic data further added to the caution, as the US trade deficit for May widened to 77.6 billion dollars, marking its largest increase since March 2025.
Bullion Market Outlook
In the international market, spot gold traded with volatility around 4,120 dollars per ounce, while spot silver remained near 60 dollars per ounce. The US dollar strengthened above the 101.12 level, which further hindered gold and silver performance. Jateen Trivedi, VP Research Analyst for Commodity and Currency at LKP Securities, noted that domestic gold prices are tracking international losses. He expects gold to trade in the range of 1,44,250 to 1,46,250 rupees in the near term. Domestically, the rupee appreciated by nearly 0.50 percent to 94.95 after Saudi Arabia reduced crude oil prices for Asian buyers for August, which eased concerns regarding India's import bill but added additional downward pressure on MCX gold.
