Gold drops toward six-week low as oil inflation spurs rate bets
Escalating US-Iran military strikes are lifting oil prices and reviving inflation fears, pushing gold toward its worst weekly loss in six weeks as traders price in near-term Federal Reserve rate hikes.
Gold and silver prices traded unevenly on the Multi Commodity Exchange (MCX) on Friday morning, extending a sharp sell-off from the previous session. By 9:05 am, August gold futures edged up 0.26% to ₹1,40,718 per 10 grams, while September silver futures fell 0.23% to ₹2,15,512 per kg. The mixed open follows a prior session where gold lost 1% and silver plunged 2%.
The broader trajectory for bullion is firmly downward. US gold prices are on track for their steepest weekly decline in six weeks, having surrendered more than 3% since Monday. The core dynamic is a shift in how markets are pricing geopolitical risk. Typically a safe-haven asset during conflict, gold is instead being sold off as the specific nature of the US-Iran confrontation threatens to keep inflation elevated.
The US expanded its airstrikes on Iran early Friday, with President Donald Trump reaffirming Washington's progress in the strikes. Iran responded by attacking US bases in neighboring countries. "The US launched multiple strikes against Iran this week, while Trump warned that the US could target the country's infrastructure. Iran responded by launching attacks on US bases in neighbouring countries, fueling fears of further escalation and a prolonged disruption to energy supplies from the region," noted Jigar Trivedi, Senior Research Analyst at IndusInd Securities.
That disruption has kept crude oil trading near $85 per barrel, driving inflation expectations higher. Because gold yields no interest, rising inflation that forces the Federal Reserve to hike rates makes bonds comparatively more attractive. The dollar index rose to 100.78 on Friday, further pressuring bullion by making it more expensive for overseas buyers. "Gold is falling as escalating tensions in the Middle East have driven oil prices higher, keeping inflationary pressures and interest rate concerns at the forefront," Trivedi added.
Technical indicators reinforce the bearish fundamental outlook. Ravi Singh, Chief Research Officer at Master Capital Services, noted that MCX gold is trading below its 21-day and 55-day exponential moving averages, a structure of lower-highs and lower-lows that favors sellers. "Immediate support is placed near the ₹1,40,400 to ₹1,40,000 zone, and a decisive break below these levels could accelerate the decline towards ₹1,36,000. On the upside, ₹1,45,000 remains a key resistance level, and the preferred strategy continues to be sell on rise as long as prices trade below this level," said Singh.
Manoj Kumar Jain of Prithvifinmart Commodity Research expects continued volatility. For global benchmarks, Jain pegs gold support at $3,955 and $3,910, with resistance at $4,034 and $4,080. Silver support sits at $55.50 and $54.40, facing resistance at $57.50 and $58.80. On the MCX, Jain sees gold finding support at ₹1,39,600 and ₹1,38,800, while silver has support at ₹2,14,000 and ₹2,11,100.
