Gold and Silver Bulls Await Week Laden with Events

Gold and Silver Bulls Face Geopolitical Headwinds

Renewed tensions between the U.S. and Iran continue to keep markets on edge as concerns about oil supply and global trade persist.

Analysts note that Strait of Hormuz in the Persian Gulf is a critical oil transit chokepoint where any supply disruptions could impact crude prices and shipping costs as well as inflation expectations worldwide.

However, according to analysts though tensions are bullish for gold in general, the current geopolitical conflict is more nuanced. This is because crude oil prices are expected to move higher if tensions persist which may also fan inflation expectations forcing global central banks to remain hawkish for an extended period.

Inflation Reports Awaited

Besides geopolitical developments, investors are keeping a close eye on monthly inflation releases from the U.S., India, and Eurozone.

Analysts anticipate these releases to shed more light on whether inflation pressures are persisting or further easing. Monthly inflation data will also likely impact market expectations about the timing of interest rate cuts by global central banks.

The U.S. Federal Reserve in particular has been sounding less dovish of late due to better-than-expected inflation readings earlier this year.

Rising inflation will likely increase the probability that interest rates may not be cut anytime soon which will likely benefit the U.S. dollar and Treasury yields. This will likely weigh on non-yielding metals such as gold and silver.

On the other hand, easing inflation pressures will likely lift expectations about rate cuts and boost bullion prices.

Precious Metals Trade Lower

Precious metals closed lower on the last trading session of the week tracking their dip in the international market.

Spot gold ended at approximately $3,340 per ounce, lower by 1.52% on a weekly basis. Similarly, spot silver shed 4.92% to around $38 per ounce.

Domestic price moves were also influenced by investor profit booking following sharp gains in the previous sessions. Gold and silver prices fell overseas as a stronger dollar weighed on safe-haven demand. Market participants also believe that rates will remain high for longer than previously thought.

Stronger Dollar Keeps Gold Bulls at Bay

Safe-haven demand has not uplifted gold prices as much as expected as analysts expect the recent strength in the U.S. dollar is providing headwinds.

A stronger greenback makes dollar-denominated gold expensive for investors holding other currencies which tends to weigh on demand from international buyers. Additionally, rising Treasury yields increases the opportunity cost of holding non-interest bearing assets like bullion.

Gold and Silver Could Trade Sideways

Analysts expect gold and silver prices to trade in a range until there is a clear trigger to move decisively higher or lower. Geopolitical risks may have to rise sharply to cause bullion prices to jump meaningfully higher.

Additionally, should inflation print higher than markets are pricing in or fresh comments from the Federal Reserve suggest that interest rates may remain higher for longer, bullion could extend losses.

What's Next

Gold and silver are expected to trade on a mixed note in the week ahead as investors stay on high alert tracking geopolitical events from the Middle East.

Markets will also pay close attention to inflation prints and other economic data from the U.S. which will influence investor expectations about interest rates. Focus will also be on monthly manufacturing activity data from China which analysts say will be keenly watched to determine demand outlook for metals and commodities.