Gold, silver prices set for volatile week as West Asia tensions keep markets on edge

Gold and silver prices are expected to witness another volatile week as escalating geopolitical tensions in West Asia, crude oil prices hovering near USD 110 per barrel and fluctuations in the rupee keep investors cautious, analysts said on Sunday.

Market participants will closely monitor developments around the Strait of Hormuz, movements in the US dollar and global economic indicators to assess the near-term direction of precious metals.

Chinese economic data will be among the first major triggers, particularly for industrial metals and silver, followed by US housing figures, consumer sentiment, inflation expectations and purchasing managers' index (PMI) readings from India, the UK and the US.

Commodity markets will remain closed during the morning session on Tuesday on account of Dussehra.

𝗖𝗿𝘂𝗱𝗲 𝗽𝗿𝗶𝗰𝗲𝘀 𝗮𝗱𝗱 𝘁𝗼 𝘂𝗻𝗰𝗲𝗿𝘁𝗮𝗶𝗻𝘁𝘆

Gaurav Garg, Head of Research at brokerage platform Lemonn, said precious metals were likely to remain range-bound amid geopolitical and inflationary concerns.

"We expect a capped, choppy week, as gold and silver will remain volatile as escalating tensions around the Strait of Hormuz and their implications for crude oil prices keep markets on edge," Garg said.

With Brent crude moving towards USD 110 per barrel in international markets, concerns over energy-driven inflation could restrict gains in bullion prices. However, declining US Treasury yields may provide some support to precious metals, he added.

Analysts said uncertainty over energy supplies and developments surrounding Russian crude could further influence inflation expectations and the outlook for gold and silver.

𝗚𝗼𝗹𝗱 𝘀𝗹𝗶𝗽𝘀 𝗯𝗲𝗹𝗼𝘄 𝗥𝘀 𝟭.𝟱 𝗹𝗮𝗸𝗵

On the Multi Commodity Exchange (MCX), gold futures for December delivery declined Rs 3,581, or 2.4 per cent, during the previous week to settle at Rs 1.47 lakh per 10 grams.

Silver futures recorded a sharper fall, plunging Rs 14,568, or 6.4 per cent, to close at Rs 2.11 lakh per kilogram.

Garg attributed the decline in domestic bullion prices primarily to the strengthening rupee, which reduced the cost of imported precious metals.

"The hit came from the currency. The rupee gained to the 94.8 level from about 96.8, a gain of more than 180 paise in five sessions, helped by RBI intervention and traders unwinding dollar positions," he said.

The appreciation of the domestic currency reduced the landed cost of imported gold, pulling domestic prices down by more than Rs 3,000 per 10 grams over four trading sessions.

The decline was nearly five times the fall recorded in international markets, highlighting the impact of currency movements on domestic bullion prices.

Silver was more vulnerable to concerns over interest rates and economic growth, although prices subsequently recovered to around Rs 2.11 lakh per kilogram.

𝗚𝗹𝗼𝗯𝗮𝗹 𝗯𝘂𝗹𝗹𝗶𝗼𝗻 𝗿𝗮𝘁𝗲𝘀 𝗱𝗲𝗰𝗹𝗶𝗻𝗲

In international markets, Comex gold futures for December delivery slipped USD 35.2, or nearly 1 per cent, to close at USD 4,181.1 per ounce.

Silver futures fell USD 3.7, or 6.13 per cent, to settle at USD 57.30 per ounce.

Pranav Mer, Senior Vice President, EBG - Commodity & Currency Research at JM Financial Services Ltd, said gold and silver futures consolidated within a range on Friday but maintained a positive bias amid short covering and bargain buying at lower levels.

"Gold and silver futures consolidated in a range on Friday but traded with a positive bias on short covering and bargain buying at lower levels," Mer said.

A weaker US dollar provided some support to bullion as traders reduced expectations of an October interest rate increase by the US Federal Reserve, despite inflation readings exceeding market forecasts.

𝗙𝗲𝗱 𝗼𝘂𝘁𝗹𝗼𝗼𝗸 𝗶𝗻 𝗳𝗼𝗰𝘂𝘀

Federal Reserve officials have indicated that the Federal Open Market Committee could wait for additional economic data before deciding on further monetary policy action.

Mer said the central bank was unlikely to raise interest rates or provide fresh guidance on its future policy trajectory ahead of the November 3 midterm elections in the United States.

"Elsewhere, we don't expect the US Fed to hike rates or give any fresh clues on their future monetary policy path ahead of the mid-term elections on November 3," he said.

Analysts said investors would continue tracking US Treasury yields, the dollar index, rupee movements and geopolitical developments in West Asia.

The direction of crude oil prices will remain particularly important, as sustained increases could strengthen inflation expectations and influence interest rate forecasts, keeping gold and silver markets volatile in the coming sessions.