Bearish for Gold/Silver: Rate-Hike Bets & Strong USD Hit Precious Metals

Gold prices have fallen over 2% this week and 17% since the US-Israeli war on Iran began, marking a fourth consecutive weekly decline. This sharp drop is attributed to a strengthening US dollar, which has gained more than 2% over the same period, fueled by increased expectations of interest rate hikes.

This trend is significant for Indian markets as gold and silver are traditional safe-haven assets and popular investment avenues. A sustained fall in prices, coupled with a stronger USD, can reduce consumer demand for physical gold and silver, impacting the profitability of jewelers and precious metal traders. It also suggests a shift in global risk sentiment, favoring the dollar over commodities.

Indian jewelry stocks like TITAN, PCJEWELLER, RAJESHEXPO, and VAIBHAVGBL are likely to face negative sentiment due to potential lower sales volumes and inventory valuation concerns. A stronger USD could also lead to higher import costs for these companies, further squeezing margins. Conversely, a stronger INR (due to USD strength) could be marginally positive for import-dependent sectors, but the primary impact here is on precious metals.

Traders should monitor the trajectory of the US dollar index (DXY) and US interest rate hike expectations. Further escalation or de-escalation of geopolitical tensions will also influence safe-haven demand. Watch for any statements from the RBI regarding currency stability and its impact on commodity imports. Key support levels for gold and silver prices should be observed for potential reversals.

• •Gold price has fallen more than 2% so far this week.
• •Gold has plunged about 17% since the US-Israeli war on Iran began on February 28.
• •The decline is pressured by a stronger US dollar, which has gained more than 2% over the same period.
• •Gold prices are set for a fourth weekly fall.