On Tuesday, gold prices in the country’s capital Delhi fell by Rs 2,800 to Rs 1.62 lakh per 10 grams. Due to military tension between Washington and Tehran, investors’ inclination towards the US dollar increased. According to the All India Bullion Association, the price of this yellow metal with 99.9 percent purity fell by Rs 2,800 to Rs 1,62,400 (including all taxes) per 10 grams. On Monday, the price of gold closed at Rs 1,65,200 per 10 grams. On the other hand, according to the association, the price of silver increased by Rs 2,000 to Rs 2,73,000 (including all taxes) per 1 kg. In the last session, its price had closed at Rs 2,71,000 per 1 kg.
Why did gold prices fall?
Saumil Gandhi, Senior Analyst, Commodities, HDFC Securities, said that gold prices came down on Tuesday and remained in a tight range as investors remained cautious due to uncertainty over US-Iran talks. He further said that due to lack of any significant success on the diplomatic front, most of the market players remained on the sidelines. He avoided taking any big bets and kept waiting for the situation to become clearer on the geopolitical front. Gandhi said that due to lack of clarity in the situation, precious metals are stuck in the same range. Besides, the market is also closely monitoring the movement of crude oil, US dollar and treasury yields (returns on government bonds) to decide its direction.
Gold became cheaper in foreign markets also
In international markets, spot gold fell nearly 1 percent to US$4,534.69 an ounce, while silver fell a little more than 2 percent to US$76.49 an ounce. Analysts said the market remained subdued after reports of fresh US military strikes on southern Iran, despite ongoing talks aimed at maintaining a seven-week-old ceasefire in Qatar. America’s Central Command said that these military operations were of defensive nature and do not indicate any end to the ceasefire arrangement.
Tension increased again between America and Iran
Meanwhile, Iran’s Islamic Revolutionary Guard Corps claimed that it has shot down an American drone, which had entered Iranian airspace. This incident has added another layer of uncertainty to the already delicate negotiations. The renewed tensions pushed crude oil prices higher, reviving fears that higher energy prices could sustain inflationary pressures globally, and force central banks to continue their tight monetary policies for longer periods of time.
What will be the strategy going forward?
Saumil Gandhi said any progress toward a potential agreement could ease tensions in energy markets and ease inflation concerns, creating a more favorable environment for the precious metal. He further said that on the contrary, any halt in talks could rekindle inflation fears due to rising energy prices, which would further strengthen expectations of tight monetary policy and put additional pressure on gold and silver prices. Jatin Trivedi, VP Research Analyst, Commodity and Currency at LKP Securities, said investors are now awaiting the upcoming US Core Personal Consumption Expenditures (PCE) inflation and GDP data, which could have a significant impact on Federal Reserve expectations and bullion movement in the near future.
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