Gold And Silver Prices Slip As Fresh US-Iran Tensions Keep Inflation, Rate Hike Fears Alive

Gold and silver prices declined on September 21 as fresh tensions between the US and Iran kept inflation concerns and the prospect of more rate hikes firmly in view. However, a continued decline in crude oil prices offered some relief to bullion investors.

At 1:50 PM, the October gold futures contract on the Multi-Commodity Exchange (MCX) was trading at Rs 1,53,494 per 10 grams, down Rs 887, or 0.57 per cent. The contract had fallen as much as Rs 1,331, or 0.86 per cent, to an intraday low of Rs 1,53,050 earlier in the session.

Silver futures also traded lower. The December contract was quoted at Rs 2,40,400 per kg, down Rs 1,203, or 0.50 per cent. It had dropped as much as Rs 2,553, or 1 per cent, to an intraday low of Rs 2,39,050.

US-Iran Tensions Keep Geopolitical Risks In Focus

Fresh tensions in Yemen have added to concerns over the wider confrontation involving the US and Iran. Houthi forces have been advancing in Yemen and have taken positions near the Bab el-Mandeb Strait, a strategically important shipping route.

The group has also launched missiles and drones towards Saudi Arabia, targeting the kingdom and key energy infrastructure. Saudi Arabia has responded with strikes on Houthi positions, while the group has retaliated with further missile and drone attacks.

The conflict in Yemen is closely linked to the broader US-Iran confrontation, with Tehran backing the Houthis. The Trump administration has maintained its campaign against Iran for months.

This morning, Iran's Revolutionary Guards warned of attacks on new targets and the deployment of new weapons if the US launches another strike. Nearly seven months into the war, the US and Iran remain locked in a stalemate, although neither side appears keen to return to full-scale fighting.

Fed Rate Hikes, US Bond Yields Weigh On Gold

Expectations of further monetary tightening in the US have also weighed on bullion prices.

The US Federal Reserve raised interest rates by 25 basis points last week, taking the benchmark rate to a range of 3.75 to 4 per cent. The central bank has also signalled further rate hikes, keeping investors cautious about the outlook for non-yielding assets such as gold.

The US 10-year Treasury yield is hovering around 5 per cent. Higher interest rates and US Treasury yields increase the opportunity cost of holding gold, which does not pay interest.

Crude Oil Prices Extend Decline

A decline in crude oil prices offered some support to bullion by easing concerns over energy-driven inflation.

Crude oil prices fell for a fourth consecutive session, retreating from a recent peak near USD 110 a barrel as hopes of a diplomatic resolution to the conflict revived. However, there were no clear signs that either side was ready to resume negotiations.

Brent crude fell to USD 101.65 a barrel, while West Texas Intermediate (WTI) declined to USD 98.19. Both benchmarks were down more than 2 per cent.

What Should Gold Investors Watch

Gold prices may remain under pressure this week as traders assess geopolitical developments, crude oil prices and US bond yields. Aamir Makda, commodity and currency analyst in the technical research team at Choice Broking, expects the moderately bearish momentum to continue.

"A clear downside momentum in oil prices and bond yields will give a significant upward push in gold prices this week," he said.