On Tuesday, silver prices experienced a significant decline, influenced by a robust U.S. dollar and rising geopolitical tensions in the Middle East, which negatively impacted investor sentiment. Recent U.S. military strikes in Iran have led to an increase in crude oil prices, heightening worries regarding inflation and the potential for sustained elevated interest rates. On MCX, the silver rate declined by 1.3% to Rs 2,72,985 per kg, whereas the MCX gold price decreased by 0.34% to Rs 1,58,534 per 10 grams. Meanwhile, in the international markets, spot silver experienced a decline of 1.8%, settling at $76.66 per ounce. Gold prices experienced a decline, with spot gold decreasing by 0.7% to $4,537.54 per ounce as of 0218. Meanwhile, U.S. gold futures for June delivery increased by 0.3% to $4,538.50.
The U.S. dollar exhibited strength against all Group-of-10 currencies, while Treasury yields experienced an uptick as cash trading resumed after a market hiatus. The appreciation of the dollar rendered dollar-denominated precious metals costlier for international purchasers, thereby constraining demand for silver and gold. Geopolitical developments continued to capture attention following the announcement from U.S. Central Command regarding American forces executing strikes in southern Iran, aimed at missile launch sites and vessels attempting to deploy mines. The U.S. characterised the operations as defensive actions. Concurrently, diplomatic initiatives persisted in the region. Iran’s chief negotiator and foreign minister engaged in talks in Doha with Qatar’s prime minister about a potential accord with the United States, which seeks to resolve the ongoing conflict that has persisted for three months.
However, both Washington and Tehran have reportedly tempered expectations regarding an immediate breakthrough. In a distinct development, Israel announced its intention to escalate military operations against Hezbollah, coinciding with ongoing negotiations between the United States and Iran. Iran has asserted that any peace agreement must encompass a cessation of hostilities in Lebanon. Previously, U.S. President Donald Trump remarked that discussions with Iran regarding a temporary agreement to prolong the ceasefire and reopen the strait were “proceeding nicely.” Brent crude futures experienced a 2% increase during the early hours of trading in Asia on Tuesday, amid ongoing tensions between the United States and Iran.
Rising crude oil prices have heightened apprehensions regarding the persistence of inflationary pressures on a global scale, which may compel central banks to sustain tighter monetary policies for an extended period. While precious metals are typically regarded as a safeguard against inflation, elevated interest rates diminish the attractiveness of non-yielding assets like silver and gold. According to CME Group’s FedWatch tool, markets are currently pricing in a U.S. Federal Reserve rate hike before the end of the year, with a 56% probability of a move by December.