Spot gold slipped to nearly $4,489 per ounce during early trade, its weakest level since March 30. US gold futures dropped by more than 1.5 per cent. Domestic markets followed the same trend. MCX gold futures for June 2026 delivery fell by Rs 1,000 to Rs 1,57,547 per 10 grams. Silver futures also remained volatile and declined more than 2 per cent to Rs 2,66,243 per kilogram.
Oil Prices and Iran Fears Rattle Bullion Markets
The latest pressure on bullion markets comes amid rapidly rising tensions involving Iran and the Gulf region. Market anxiety deepened after a drone strike caused a fire at a nuclear facility in the United Arab Emirates. The incident triggered fears of wider instability across West Asia and renewed concerns over global energy supplies.
Saudi Arabia’s interception of drones and uncertainty surrounding the Strait of Hormuz pushed crude oil prices to a two-week high. Investors fear that any disruption in the region could affect one of the world’s most critical oil shipping routes.
Under normal circumstances, geopolitical instability tends to strengthen gold prices as investors seek safer assets. This time, however, rising oil prices have revived inflation fears instead of boosting safe-haven demand.
Inflation and Interest Rate Fears Hurt Gold
The sharp rise in crude oil prices has strengthened expectations that central banks may keep interest rates elevated for longer. Traders increasingly believe that the US Federal Reserve could delay any major rate cuts if inflation continues to remain stubbornly high.
That outlook has reduced the appeal of gold, which does not provide interest income. Rising US Treasury yields and a stronger dollar have also added pressure on precious metals.
Recent economic data from the United States, China and India has reinforced these concerns. US producer inflation recorded its fastest rise since 2022, while consumer inflation also exceeded market expectations. Treasury yields subsequently climbed to multi-month highs, strengthening the dollar further and weighing on bullion demand.
Commodity analysts believe gold may remain under pressure if oil prices continue rising and global interest rates stay elevated.
India Tightens Precious Metal Import Rules
India’s policy measures have added another layer of uncertainty to the bullion market. Earlier this month, the government increased import duties on gold and silver from 6 per cent to 15 per cent in an effort to protect foreign exchange reserves.
The Centre has now tightened restrictions further by shifting silver imports into the “restricted” category. Under the latest Directorate General of Foreign Trade notification, silver imports will require government licences with immediate effect.
Special Economic Zones and Export Oriented Units have been exempted from the restrictions, provided imported silver is not diverted into the domestic market.
Prime Minister Narendra Modi has also urged citizens to avoid unnecessary gold purchases over the coming year in order to conserve foreign exchange reserves for essential imports such as crude oil.
Market participants believe the tighter import regime could reduce domestic silver supply and widen retail premiums despite weakness in international prices.
Investors Watch Global Economic Signals
Investors are now closely monitoring several key global indicators, including US housing data, manufacturing PMI figures, unemployment claims and the minutes of the Federal Open Market Committee meeting.
Markets are also tracking the anticipated interaction between US President Donald Trump and Chinese President Xi Jinping amid continuing concerns over trade tensions, supply chains and the Iran conflict.
For bullion traders, the current environment has become increasingly difficult to navigate. Gold, long considered a reliable shield during periods of uncertainty, now finds itself under pressure from rising inflation, expensive energy and the prospect of prolonged monetary tightening.