Summary of this article
Gold and silver prices have rebounded due to falling oil prices and a weakening US dollar following a potential diplomatic breakthrough in the West Asia crisis.
The metals are serving as a critical safe-haven hedge against inflation and geopolitical uncertainty surrounding the Strait of Hormuz.
Analysts recommend a strategy of staggered accumulation on price pullbacks rather than chasing the current market momentum.
Gold and silver prices extended gains on May 7. The price of 1 gram of 24-karat gold edged up by 0.21 per cent to Rs 15,246 per gram. The price of 22-karat gold also inched higher by 0.21 per cent to Rs 13,975 per gram. Silver prices also witnessed an uptick as the price of 1 kg of silver of 999 purity edged up by 1.88 per cent to Rs 270,000. On the other hand, silver futures and gold futures also edged higher on the Multi-Commodity Exchange (MCX).
Why Are Silver and Gold Prices Rising?
Gold futures with a June 5, 2026, expiry rose 1.13 per cent to Rs 1,53,865 per 10 grams, extending gains from yesterday’s rally. Silver futures with a July 3, 2026, expiry also gained 3 per cent to the day’s high of Rs 2,60,999 per kg. The gains followed continued declines in the previous week, wherein international spot prices fell around 2 per cent to near $4,614 per troy ounce, while MCX gold slipped 0.80 per cent to Rs 1,51,352.
Kaynat Chainwala, Assistant Vice President (AVP) of Commodity Research, Kotak Securities, told Outlook Money that a sharp drop in oil prices removed the headwinds which had weighed down gold and silver prices.
“The dominant driver is the sharp drop in oil prices following reports of a US-Iran understanding on gradually reopening the Strait of Hormuz. This accelerated oil price drops and bond yield declines while weakening the dollar to pre-war levels, collectively removing the three key headwinds that had weighed on bullion since the war began in late February,” Chainwala said.
Gold and Silver Rally in the International Market
The rally seen in the domestic market followed a similar trend seen in the international market, where spot gold inched above $4,700 per ounce after a three per cent rally in the previous session. On the other hand, spot silver gained to trade near $78 per ounce.
Developing Situation in West Asia
The jump in gold and silver prices came as investors monitored the developing situation in the West Asia crisis and its probable effects on inflation and the US Federal Reserve’s interest-rate expectations. The drop in gold prices seen last week prompted investors to buy the precious metal. On the other hand, oil prices eased slightly, which further supported the rebound rally seen in gold and silver prices. The buying momentum in gold and silver comes amid hopes of a possible agreement between the US and Iran, which could put an end to the two-month-long conflict in West Asia.
Gold and Silver’s Safe-Haven Appeal
Amid the developing situation, the prices of gold and silver remain linked to safe-haven demand. While a fragile truce is in place between the US and Iran, the West Asia region remains under pressure. The conflict is linked to control of the Strait of Hormuz. The trade of several commodities, such as crude oil and fertiliser, depends on stability in the Strait. Disruption in the waterway has increased energy costs, which influence inflation. Higher inflation can prevent central banks from cutting interest rates; this further supports the demand for gold and silver, as they are seen as a hedge against inflation and global uncertainty. Apart from the disruption in the Strait of Hormuz, central bank buying also continued to support prices.
What Should Investors Monitor Now
Speaking about the outlook for the precious metals in the near-term, Chainwala added that Automatic Data Processing’s payroll data can further boost the rally as a slowdown in jobs data can increase the chances of an interest rate cut, boosting the prices of non-yielding assets like gold and silver.
“Softer-than-expected ADP payroll data has added a secondary tailwind ahead of Friday's official jobs report. If Friday’s official jobs report confirms the slowdown, expectations for potential Federal Reserve rate cuts could strengthen further, providing an additional boost to non-yielding assets like gold and silver. For the first time since the conflict began, geopolitical and macroeconomic factors are pulling in the same direction for precious metals,” Chainwala said.
What Should Investors Do?
Chainwala advised investors who are considering buying silver and gold, anticipating potential price increases, to practise staggered accumulation on pullbacks instead of chasing momentum.
“From a medium-term perspective, staggered accumulation on pullbacks appears more prudent than chasing momentum at elevated and volatile levels,” Chainwala said.
Chainwala also said that while gold and silver can both surge to pre-war levels, investors should brace for near-term volatility and sharp two-way moves.
“If a durable US-Iran agreement materialises and Friday's jobs data confirm labour market cooling, gold has a credible path toward retesting its pre-war highs above $5,000/oz, while silver, given its industrial leverage, could outperform on a percentage basis. However, near-term volatility remains elevated, and investors should be prepared for sharp two-way moves until the geopolitical picture fully clears,” Chainwala said.
