The ongoing Iran-Israel war has not improved sentiment in the bullion market, as gold prices continued their downward trend on Monday. The April yellow metal futures declined by Rs 3,000 per 10 gram (2%) to reach a day’s low of Rs 1,55,434 on the MCX, influenced by profit booking in international markets. Gold price was hovering around $4,997.40 an ounce on the COMEX around 2 pm, experiencing a decline of $64.30 or 1.3% compared to the closing price on Friday. Traders exhibited caution as they approached the US Federal Reserve policy meeting set to commence tomorrow.
The two-day meeting will conclude with a conference led by Chair Jerome Powell, as global markets closely monitor the insights from the world’s largest central bank in the context of the ongoing conflict, where the US stands as a partner to Israel. The Fed is anticipated to maintain interest rates amid rising inflation concerns, particularly due to escalating energy prices, as the Strait of Hormuz remains closed for Israel, the US, and their allies. Brent has surged by 40% this year and is presently trading at approximately $106 per barrel. Even a declining rupee has not managed to enhance sentiment among domestic investors. The rupee’s decline against the US dollar bolsters domestic prices, as import expenses continue to be affected.
The local currency is currently trading at approximately its all-time low of 92.47. Jateen Trivedi remarked that geopolitical tensions in the Middle East persist in introducing volatility into bullion markets, while escalating inflation concerns could maintain elevated interest rates, thereby constraining significant upward momentum in gold. Trivedi remarked on the rupee factor, stating that domestic gold prices exhibit greater volatility than COMEX as a result of INR fluctuations. He believes that the movement of the rupee can either enhance corrections or restrict the upward momentum in MCX gold.
Gold has entered a sideways corrective phase following the earlier rally, with prices now consolidating around the Rs 1,56,000 to Rs 1,57,000 zone. The overarching framework suggests a decline in momentum, as geopolitical tensions between the US-Israel and Iran persist, maintaining heightened volatility in bullion markets. “Geopolitical tension often pushes investors toward safe-haven assets like gold, though inflation and interest rate expectations can limit rallies,” the analyst said.