Gold, silver drop on MCX as Iran risks outweigh soft US inflation
Indian gold and silver futures declined as a surprise slowdown in US inflation was overshadowed by rising crude prices and hawkish Federal Reserve commentary tied to escalating US-Iran tensions.
Gold and silver prices fell in early domestic trading on Wednesday, defying expectations that soft US inflation data would boost the safe-haven assets. On the Multi Commodity Exchange, August gold futures dropped 0.55% to ₹1,41,471 per 10 grams, while September silver slipped 0.41% to ₹2,22,266 per kg.
The declines came despite a significantly weaker US Consumer Price Index reading for June. Annual inflation decelerated to 3.5% from 4.2% in May, while month-on-month prices fell 0.4%, marking the first drop since April 2020. Core inflation also cooled, rising 2.6% year-on-year against expectations of 2.8%.
Normally, such data would weaken the dollar and lift non-yielding bullion. The dollar index did ease to 100.76 from 100.92. However, those gains were offset by the escalating US-Iran military conflict, which pushed Brent crude September delivery over 1% higher to near $86 a barrel. US forces struck Iran for a fourth consecutive day and reimposed a naval blockade, though President Donald Trump abandoned a plan to levy shipping through the Strait of Hormuz.
Federal Reserve Chairman Kevin Warsh reinforced the central bank's restrictive posture during a Tuesday hearing before the House Financial Services Committee. Stating he would "continue to do his job" despite political pressure, Warsh reiterated that returning inflation to the 2% target remains his main goal.
Economists view the current environment as highly fragile. "After benign core inflation, it appears less likely that the FOMC will raise rates over the next few meetings," said Jeffrey Roach, Chief Economist for LPL Financial. "However, we may still be at an inflection point, given the risk that the energy shock could spill over into other categories of consumer prices. A positive resolution with Iran before the end of the summer is becoming increasingly important."
Manoj Kumar Jain of Prithvifinmart Commodity Research noted that while the weak inflation data initially supported precious metals, Warsh's hawkish tone and rising oil prices are capping upside momentum. He advised traders to book profits on long positions during rallies, while long-term investors should hold. In the international market, Jain pegged gold support at $4,022 and resistance at $4,110, with silver support at $57.40 and resistance at $60.60.
