Gold, Silver Prices Tumble After Trump Remarks On Iran War

Precious metals prices fell on domestic exchanges after US President Donald Trump said that Washington will continue its strikes on Iran. The war has been ongoing for over a month now and is showing no signs of de-escalation, which has led investors to become risk-averse, rebounding from gains in the international market overnight.

Gold futures for June delivery fell over 3 per cent on the MCX, trading at Rs. 1.49 lakh per 10 grams. Silver prices tumbled further, with futures for delivery in May falling over 6 per cent on the MCX, trading at Rs. 2.28 lakh for a kg.

Trump, in his address from the White House, said that the  strategic objectives of the US in Iran were nearing completion. However, he said that the US would hit Iran "extremely hard" over the next two to three weeks. The potential escalation of US military strikes and geopolitical tensions, and Trump also offered no timeline for the end of the Iran war, turned investors sour towards precious metals, in turn leading to a rise in crude oil prices.

Typically, in a situation of geopolitical uncertainty, investors tend to opt for safe-haven assets such as gold. However, geopolitical tensions over the past year have more than doubled gold prices. This, along with the current war leading to a rise in the US dollar, has led to a fall in precious metals prices. Bullion is pegged against the US dollar. The ongoing Iran war has led to a 40 per cent surge in crude oil prices since it began, which in turn has led to a rise in demand for the dollar.

Gold and silver exchange-traded funds also plunged during the session, with Nifty Goldbees falling over 2 per cent, ending at Rs. 120.8, and Nifty Silverbees down over 4 per cent at Rs. 215.5.

On the matter of the turn in investor sentiment, a note by Bajaj Broking said that it was after “Donald Trump signalled potential strikes on electricity infrastructure if no agreement is reached. This pushed crude above $106 per barrel, triggering weakness across Asian markets.”

Along with the US dollar rebounding on Trump’s remarks on the Iran war, the benchmark US treasury yield also surged to 4.37 per cent. This added to pressures on bullion prices as higher interest rates typically raise the opportunity cost of holding a non-yielding asset such as gold.