Gold and silver prices rose on Monday. This was due to the fall in the dollar and softening of oil prices. The softening of oil prices was due to renewed hopes regarding the peace deal between the US and Iran, which improved market sentiment regarding disruptions in global supply.
In the international markets, spot gold was trading at around $4,565 an ounce, up more than 1 per cent during the day, while spot silver was trading at around $78 an ounce, up more than 3 per cent. The dollar index remained in the negative zone throughout the day. This gave momentum to gold.
If we talk about the domestic commodity market, the futures price of gold for June on the Multi Commodity Exchange remained stable, which was last at Rs 1,59,325 per 10 grams. The most active contract of silver on the Multi Commodity Exchange was trading at Rs 2,76,500 per kg, up 1.7 percent. MCX prices take cues from international market prices.
Gold prices improve due to fall in oil prices
Oil prices fell below the level of $ 100 per barrel. On Saturday, US President Donald Trump said a deal between Washington and Tehran was “largely finalized,” adding that the vital trade route, the Strait of Hormuz, could soon reopen.
His statement helped gold recover from last week’s losses, as it reduced inflation fears and also weakened expectations of central banks around the world adopting tighter monetary policies.
Tim Waterer, chief market analyst at KCM Trade, told Reuters that Trump was raising market expectations about some kind of deal with Iran that could reopen the Strait of Hormuz. This possibility has had an impact on oil prices and, as a result, has provided a good support to gold from an inflation perspective.
Despite rekindled hopes of a possible peace deal, market sentiment remains cautious. On Sunday, American media outlet Axios reported that it may take “a few more days” for the White House to approve the agreement.
Interest rates may increase in December
Traders have raised expectations of an interest rate hike by the US Federal Reserve in late December, and are not expecting any interest rate cuts by the central bank at the moment. In the long run, higher interest rates increase the appeal of interest-bearing assets such as bonds and currencies, which has a negative impact on precious metals.
On Friday, Kevin Wersh was sworn in as the new Chairman of the US Federal Reserve, replacing Jerome Powell. Warsh is known for his strict policy thinking. For further signals, markets will keep an eye on US GDP data and also pay attention to the ongoing conflict in West Asia. US markets are closed today due to Memorial Day. Despite today’s recovery, gold prices remain down about 13 percent since tensions in the Middle East began on February 28.
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