Gold and silver prices declined in the domestic futures market on Monday, 13 July, morning amid a jump in crude oil prices due to escalating tensions between the US and Iran, which drove the US dollar higher.
Crude oil prices jumped 4%, boosting demand for the US dollar and driving it higher. The dollar index jumped nearly 0.30% to 101.22, weighing on gold prices.
An increase in the US dollar makes greenback-denominated gold more expensive for buyers in other currencies, creating demand fatigue.
Media reports suggested the US and Iran have exchanged heavy missile and drone assaults, with Tehran saying it had again closed the Strait of Hormuz, a vital waterway for global crude supply.
Tensions between the US and Iran have intensified with media reports claiming more than 10 projectiles hit Iran’s Qeshm Island in Hormuz.
U.S. Central Command (CENTCOM) announced strikes against Iran on 12 July, hitting dozens of targets at multiple locations with precision munitions to “degrade Iran’s ability to continue attacking international shipping flowing through the Strait of Hormuz.”
Crude oil prices jumped 4%, reviving inflationary fears and expectations of aggressive monetary tightening by the US Federal Reserve and other major central banks globally.
Gold is considered a hedge against inflation, but it tends to decline during periods of monetary tightening because it is a non-yielding asset.
(This is a developing story. Please check back for fresh updates.)
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Disclaimer: This article is for educational purposes only and does not constitute investment advice. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
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