Global Bullion Market Weakens Amid Tensions
Gold and silver prices experienced a notable decline on Friday, reflecting a broader weakening trend across international bullion markets. This downturn was primarily driven by escalating geopolitical tensions in the Middle East and a strengthening US dollar, which collectively dampened investor confidence. Despite some support from softer US inflation data, these positive indicators were insufficient to offset concerns that persistent regional instability could lead the Federal Reserve to maintain a cautious stance on interest rate cuts.
Domestic Prices Reflect International Trend
In the domestic market, MCX gold hovered around the ₹1.41 lakh per 10 grams mark, while MCX silver traded below ₹2.20 lakh per kilogram. Retail bullion prices also eased, with 24-carat gold witnessing a drop of at least ₹2,800 per 100 grams, pushing the price of 10 grams below ₹1,43,500. Internationally, spot gold fell nearly 1% to approximately $4,030 an ounce, and spot silver declined over 1.1% to just above $57 an ounce, extending losses amidst a cautious investment climate.
Geopolitical Concerns Outweigh Inflation Data
Gold's traditional role as an inflation hedge received some minor impetus from recent US inflation figures, which suggested easing price pressures. Data released earlier in the week indicated an unexpected decline in US producer prices for June—the first monthly drop in nearly a year—largely due to reduced energy costs. This softer wholesale inflation reading followed weaker-than-expected US consumer inflation data, reinforcing expectations of moderating inflationary pressures.
Ordinarily, cooling inflation tends to boost gold by increasing the likelihood of lower interest rates. However, investors remained predominantly focused on geopolitical developments and the Federal Reserve's policy outlook. Ponmudi R, CEO of Enrich Money, observed, "MCX Gold ended the week on a negative note but managed to find support near ₹1,40,000 and is attempting to stabilize above this key level. A decisive break below ₹1,40,000 could extend the decline toward the ₹1,39,300–₹1,38,700 support zone. On the upside, immediate resistance is placed at ₹1,40,700–₹1,41,000, followed by ₹1,42,000–₹1,42,700. A sustained move above these resistance zones could strengthen recovery momentum. Overall, the broader trend remains cautiously negative until prices reclaim key resistance levels."
Escalating Middle East Tensions Drive Caution
Market sentiment turned cautious after the United States conducted additional strikes on Iranian targets, sparking renewed concerns about instability in the region. Although US President Donald Trump indicated Tehran's willingness to resume negotiations, the fresh military action overshadowed previous hopes for sustained de-escalation. The heightened geopolitical uncertainty also bolstered the US dollar, which traded around the 100.50 mark on the dollar index. A stronger dollar typically makes gold more expensive for international buyers, thereby limiting demand and exerting downward pressure on bullion prices.
Crude Oil Eases, But Bullion Remains Under Pressure
Crude oil prices saw a modest softening after recent gains but largely remained elevated, with US WTI crude futures near $80 a barrel and Brent crude holding around $85 a barrel. While easing crude prices usually help mitigate inflation concerns, potentially supporting gold by strengthening expectations of lower interest rates, analysts noted that the latest geopolitical developments and a firmer dollar outweighed the positive impact of softer energy prices, keeping both gold and silver under significant pressure.