Bullion futures fall sharply on strong USD, Iran tensions

Gold, silver fell after rally amid global cues, rising yields and heightened uncertainty across markets

India bullion futures declined sharply on Thursday, tracking global weakness as a stronger dollar and escalating geopolitical tensions weighed heavily on investor sentiment.

Gold and silver contracts on the Multi Commodity Exchange (MCX) fell after a four-day rally, mirroring losses on the COMEX.  The decline followed a rise in the dollar index and fresh concerns after US President signalled continued military action in Iran over the coming weeks. 

At around 1606 IST, the most active June gold contract on MCX dropped 3.4% to ₹1,48,505 per 10 grams. Similarly, the May silver contract fell 6% to ₹2,27,898 per kg. 

In global markets, COMEX gold futures declined 3.5% to $4,663.2 per ounce, while silver futures slipped 7% to $70.89 per ounce. 

The dollar index rose 0.7% to 100.2, making dollar-denominated commodities such as gold and silver more expensive for holders of other currencies, thereby reducing demand.  Market sentiment turned cautious after renewed geopolitical tensions in West Asia. Analysts said uncertainty intensified after Trump indicated that US military operations in Iran would continue in the near term, dampening hopes of a quick resolution to the conflict.

According to commodity analysts, rising crude oil prices have further heightened inflation concerns, reducing expectations of interest rate cuts by the US Federal Reserve. Markets are now pricing in a prolonged phase of tighter monetary policy, which has added pressure on non-yielding assets like gold. 

Kaynat Chainwala of Kotak Securities noted that bullion prices came under broad selling pressure as investors reassessed risks following conflicting signals on the geopolitical front. 

While there were earlier expectations of easing tensions, the latest developments triggered a reversal in sentiment.   Overall, bullion futures remain vulnerable to movements in the dollar, interest rate expectations and geopolitical developments, with volatility expected to persist in the near term.