Precious Metals Face Pressure Amid Inflation, Middle East Tensions, and Economic Data

Precious metals are expected to remain under pressure in the coming week, with investors weighing geopolitical uncertainty in the Middle East against upcoming inflation data and other economic indicators that could shape expectations for global interest rates, analysts said.

The latest escalation between the US and Iran has renewed concerns over energy supplies after Tehran announced the closure of the Strait of Hormuz following an attack on a vessel it claimed was travelling through an unauthorised route.

The conflict widened after US strikes prompted retaliatory attacks by Iran on American-linked facilities in the UAE, Kuwait and Bahrain.

While geopolitical tensions typically support safe-haven demand for gold, analysts said the current environment could have a mixed impact.

A sustained rise in crude oil prices may fuel inflation, strengthen the US dollar and push Treasury yields higher, reducing the appeal of non-yielding assets such as gold and silver.

"Gold and silver are still witnessing a corrective phase. The direction will largely depend on how the US-Iran conflict unfolds. Any major escalation is likely to lift oil prices further and support the US dollar and Treasury yields," said Pranav Mer, senior vice president, commodity and currency research, JM Financial Services, as quoted by PTI.

Apart from geopolitical developments, investors are awaiting inflation readings from the US, India and the euro area, which could provide fresh signals on the policy stance of major central banks.

On the domestic front, bullion prices ended the week sharply lower.

MCX gold futures for August settlement declined Rs 3,900, or 2.65 per cent, to Rs 1.43 lakh per 10 grams, while September silver futures tumbled Rs 14,746, or 6.2 per cent, to Rs 2.22 lakh per kg.

The weakness mirrored global trends, where Comex gold edged down 0.3 per cent to USD 4,113.7 an ounce and silver lost 1.5 per cent to $60.16 an ounce.

According to Jateen Trivedi, vice president, research analyst, commodity and currency at LKP Securities, gold struggled to hold on to short-lived gains as investors continued to lock in profits.

He said a stronger US dollar, elevated crude oil prices and expectations that interest rates could stay higher for longer kept sentiment subdued.

Although a softer rupee offered some support to domestic gold prices, it was not enough to offset weakness in overseas markets.

Beyond inflation data, traders will also track US retail sales, housing numbers and weekly jobless claims for clues on the Federal Reserve's next move.

Chinese economic data, including GDP, industrial production, trade and credit growth, will also be watched closely for their impact on the broader commodities market.

Analysts believe bullion is likely to remain range-bound until markets receive a stronger trigger, either through a significant shift in geopolitical developments or fresh signals on the global interest rate outlook.