Gold and silver prices surged on Monday, backed by a slip in the dollar and easing oil prices driven by renewed optimism surrounding a peace deal between the US and Iran, which helped lift market sentiment around global supply disruptions.
In international markets, spot gold was quoted around the $4,565 per ounce level, up more than 1% on the day, while spot silver was trading near the $78 per ounce mark, rising over 3%.
The dollar index, which measures the strength of the dollar against a basket of six other currencies, was trending down on the day, aiding momentum for the yellow metal, as a soft greenback makes precious metals less expensive for overseas investors.
On the domestic front, MCX gold futures for June were trading flat, last quoted at Rs 1,59,325 per 10 grams. The most-active silver contract on the MCX was up 1.7%, trading at Rs 2,76,500 per kg. MCX prices take cues from international market prices.
Gold price recovers as oil prices tumble
Oil prices slipped below the $100 per barrel mark, as on Saturday, US President Donald Trump said that a deal between Washington and Tehran was “largely negotiated”. He added that the crucial trade route, the Strait of Hormuz, could reopen soon.
His statement helped gold recover from last week’s losses, as it reduced inflationary fears and helped dampen expectations of tighter monetary policy by central banks globally.
“Trump has been raising market hopes for some sort of deal with Iran, which could lead to the reopening of the Strait of Hormuz. That prospect has weighed on oil prices and, by extension, given gold a welcome lift from an inflation perspective,” Reuters quoted Tim Waterer, chief market analyst at KCM Trade, as saying.
Despite the reignited hopes of a prospective peace deal, market sentiment remains cautious, as on Sunday, American media outlet Anxious reported that the White House could take “several more days” to finalise the deal’s approval.
Markets price in rate hike for December
Traders have increased expectations of rate hikes by the US Federal Reserve later in December and currently weigh in no rate cuts by the central bank. Over the longer run, higher interest rates increase the appeal of interest-bearing assets like bonds and currencies, weighing negatively on precious metals.
On Friday, Kevin Warsh was sworn in as the new chair of the US Federal Reserve, succeeding Jerome Powell. Warsh is known for his hawkish policy stance. For further cues, markets will watch out for US GDP data and monitor the West Asia conflict.
US markets are closed today on account of Memorial Day.
Despite today’s recovery, gold prices remain down by nearly 13% since tensions in the Middle East began on February 28.