Gold slips to $4,166.40 an ounce on Comex despite war and geopolitical tension
Gold and silver prices are falling sharply in international and Indian markets, even as conflict and uncertainty grip the world, with several reasons cited.
The world is in the grip of war, geopolitical tension and economic uncertainty, yet the bullion market is showing the opposite picture. In such conditions gold is usually seen as a safe investment and its price soars. But gold and silver prices are now falling sharply, from international markets to Indian ones.
On Comex, the international commodity market, gold has fallen to $4,166.40 an ounce. Within India too, gold has slipped to around Rs 1.48 lakh for 10 grams. The question is why gold is getting so cheap despite the unrest in the world. Several reasons are being cited.
The first is the strength of the dollar. Gold's movement in the international market depends largely on the US dollar. The dollar index has gained considerable strength in recent days. A stronger dollar affects other countries' currencies and makes gold costlier for those buying in them. As a result, demand falls and prices come down.
The second is the rise in US bond yields. A higher return on US government bonds has dulled gold's shine. Gold pays no interest, so investors are moving in large numbers to bonds that are safe and offer higher returns.
The third is profit booking. Gold prices had reached high levels over the past few months. After touching record levels, large institutional investors and traders began selling heavily to lock in their profits. This sudden selling pressure pushed prices down quickly.
The fourth is signs of inflation and high interest rates. The rise in crude oil prices has strengthened the likelihood of inflation climbing again across the world. To keep inflation in check, the US central bank, the Federal Reserve, may avoid cutting interest rates and keep them high. A period of high interest rates is considered negative for gold.
The fifth is geopolitical developments and the US stance. US President Donald Trump rejected an Iran proposal that showed readiness to open the Strait of Hormuz and hold nuclear talks in exchange for lifting the blockade. Uncertainty in the market grew after this, and gold lost the key level of $4,200 an ounce on Comex.
In the Indian bullion market too, customers are holding back. The coming festivals and the wedding season are close, yet customers and bullion traders are waiting for prices to fall further. Because of this sluggish demand, gold prices in the Indian market also remain under pressure.
