From the international market to the domestic futures market, a big decline has been recorded in both the precious metals. On July 8, silver slipped by around Rs 6700 in a single day, while gold also took a dive. The most important reasons behind this big decline are the increased tension between America and Iran, the rise in crude oil prices and the strength of the US dollar.
Prices fell face down in futures market
Heavy selling pressure was seen on the Commodity Exchange (MCX) in India on July 8. A decline of 1.16 percent was recorded in gold futures. Due to this, gold fell by Rs 1,692 to Rs 1,43,710 per 10 grams. At the same time, silver broke many previous records of decline. There was a massive fall of 2.93 percent in Silver Futures. As a result, the price of silver fell by Rs 6,763 to Rs 2,24,201 per kg. There was also disappointment in the global market, where spot gold weakened by 1.1 percent to $ 4,061.32 an ounce and US gold futures fell by 2 percent.
America-Iran dispute became the reason
The roots of the sudden cheapness of gold and silver are hidden in international politics. US President Donald Trump announced on Wednesday that the ceasefire with Iran is now over. This news has ended the possibilities of permanent peace talks between the two countries. Due to this fear of war, the prices of crude oil suddenly increased by more than 6 percent.
Crude oil becoming expensive directly means increasing inflation across the world. Now to control this inflation, the American Central Bank (Federal Reserve) will increase its interest rates. It is a simple rule of economics that whenever the dollar strengthens, the shine of gold begins to fade. The minutes of the Fed’s meeting will be released late tonight, which will make their future strategy regarding inflation clear.
Threat looming on the Strait of Hormuz
This panic in the market is not without reason. According to Gaurav Garg, Research Analyst, Lemon Markets Desk, the real reason for the softening of gold prices in the domestic market is the increasing geopolitical tension in the Middle East. There is a danger of the Strait of Hormuz being closed again, which is the most important route for the supply of oil and gas around the world. If this route is disrupted, crude oil prices will rise further. Due to this fear, gold has fallen for the third consecutive day today.
Is further heavy decline possible?
Market experts believe that there may be pressure on gold for some time to come, but no major decline is expected. Prices will go up and down within a limited range only. The biggest reason for this is the aggressive purchasing by central banks around the world.
According to the report of the World Gold Council (WGC), central banks have invested heavily in gold in the month of May. For example, Tanzania’s central bank has bought about 28 tonnes of gold in the last 18 months. This big purchase is saving the price of gold from a complete crash.
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