Gold, silver prices rise 1% but analysts cautious after 15% March drop; here’s why

Spot gold rose 0.8% to $4,544 per ounce at 0114 GMT. US gold futures ‌for April delivery ⁠gained ⁠0.3% to $4,573. Meanwhile, spot silver rose 1.2% to $70.81 per ounce, spot platinum gained 0.1% to $1,902, and palladium was up 1.1% at $1,421 per ounce.

The rise in gold and silver prices comes today amid a softer dollar and falling bond yields, but the precious metals are all set to record their worst month in more than 17 years as higher energy prices dimmed hopes for a US interest rate cut this year.

The dollar index declined slightly. The benchmark US 10-year yield dropped for the first time in three days, falling nearly 10 basis points to 4.344%. US two-year yields, which reflect interest rate expectations, were down nearly 9 bps to 3.828%.

Gold has lost about 15% so far this month, and is heading for its steepest fall since October 2008. However, prices are up about 5% so far this quarter. Traders have now almost completely priced out any ⁠chance of ‌a US Federal Reserve rate cut this year, as higher energy prices threaten to spur broader inflation. Notably, this comes after expectations of two Fed rate cuts this year before the war began in the Middle East.

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Fed Chair Jerome Powell said on Monday that the American central bank can wait to see how the Iran war impacts the economy and inflation, noting ‌that policymakers typically look through shocks such as those from higher oil prices.

Oil prices cooled slightly on Tuesday after their skyrocketing rally, with Brent crude futures dropping over 1% to near the $111 per barrel mark after a report said that US President Donald Trump is willing to end the war with Iran even if the Strait of Hormuz remains largely closed.India’s largest commodity exchange, the Multi-Commodity Exchange of India (MCX), will remain shut for trading in the first session (9 am to 5 pm) today on account of Shri Mahavir Jayanti. Trading will resume in the evening session between 5 pm and 11:30 pm, as per the schedule on the website.

Why do analysts advise caution?

Despite the bounce, sentiment remains cautious as macro triggers still favour higher interest rates, said Jateen Trivedi, VP Research Analyst of Commodity and Currency at LKP Securities. “Overall, gold is likely to stay volatile with limited upside unless clarity emerges on inflation and geopolitics,” the analyst said.

The recent sharp correction appears to have triggered bargain hunting, with bullion gaining as investors moved away from risk assets amid persistent uncertainty surrounding the U.S.-Iran conflict and fragile global sentiment, said Manav Modi, Commodities Analyst at Motilal Oswal Financial Services. “Rebound underscores gold’s sensitivity to shifting macro expectations, particularly after earlier pressure from rising bond yields and a stronger U.S. dollar driven by ‘higher-for-longer’ interest rate concerns,” he added.

“Despite the recovery, underlying risks remain, as disruptions through the Strait of Hormuz have curtailed nearly a fifth of global energy shipments, pushing oil prices higher and fuelling inflation fears. This has kept central banks on alert, with policymakers signalling readiness to act if price pressures intensify further. On the physical side, demand in India saw a mild pickup due to lower prices, while Chinese premiums eased amid softer consumption. This focus will now be on CPI data from major economies, US consumer confidence and jobs market data,” the analyst further said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)