Gold and silver prices experienced a decline exceeding 1% on the Multi Commodity Exchange on Tuesday. This drop was influenced by escalating tensions in the Middle East, which bolstered expectations that the US Federal Reserve may implement further interest rate hikes to address persistent inflationary pressures. Gold futures with August expiry on the MCX declined by Rs 1,834 per 10 grams, representing a decrease of 1.3%, bringing the price to Rs 1,40,568 per 10 grams. Futures contracts set to expire in October experienced a decline of over 1% during morning trading. Silver futures with September expiry decreased by Rs 1,960 per kg, settling at Rs 2,20,674, while contracts set for December also experienced a decline exceeding 1%. In the international market, gold prices experienced a decline exceeding 1% on Tuesday, positioning themselves for the most significant monthly drop since October 2008.

Spot gold declined by 1.5% to $3,956.92 per ounce as of 0221, marking a 12.7% decrease for the month and positioning it for a fourth consecutive monthly decline. Spot silver declined by 2% to $57.13 per ounce, while platinum experienced a decrease of 1.1% to $1,557.21. Additionally, palladium saw a slight drop of 0.4% to $1,208.17. All three metals were on track for losses both monthly and quarterly. Gold was also on track for its first quarterly decline since 2024 and its largest since the June quarter of 2013, as the Iran war propelled energy prices sharply higher, fuelling inflation concerns and bolstering expectations of additional interest rate increases. Traders currently anticipate three Federal Reserve rate hikes this year, with the CME FedWatch Tool indicating approximately a 64% probability of an increase in September. Gold has long been viewed as a safeguard against inflation; however, its attractiveness diminishes in an environment characterised by elevated interest rates.

Investors are closely monitoring the potential for discussions between the US and Iran in Doha, following reciprocal strikes over the weekend that have heightened concerns regarding the stability of their interim peace agreement and have impacted shipping routes through the Strait of Hormuz. Iran, however, has stated that no meeting has been arranged, as weekend missile exchanges between both parties have tested the interim ceasefire that concluded the four-month-long conflict. Investors are anticipating the June ADP employment report and nonfarm payrolls data, both scheduled for release this week, for additional insights into the Federal Reserve’s interest rate path. “You have high inflation, high interest rate expectations and a strong dollar, and that is overriding all other bullish factors that are typically associated with a gold rally,” Edward Meir, an analyst, stated.

Gold experienced new profit-taking in the last session as prices encountered significant resistance near $4,100 on COMEX and approximately Rs 145,500 on the MCX, according to Jateen Trivedi. A stronger US dollar continued to exert pressure on bullion, while anticipations of elevated interest rates diminished the attractiveness of non-yielding assets like gold. Central banks’ buying interest has diminished as markets reevaluate the global interest rate landscape. Investors are currently anticipating the US ADP Employment Change report, nonfarm payrolls data, and the unemployment rate, all of which are expected to significantly influence the trajectory of the dollar and the subsequent movements in gold. The analyst observed that volatility is expected to stay heightened until the publication of these crucial economic indicators. Gold is projected to trade within the Rs 140,500–145,500 range, with upward movements likely encountering selling pressure unless macroeconomic data indicates a weakening of the dollar.