Bullion outlook: Gold, silver investors to track Middle East tensions, US and India inflation readings

Gold and silver prices are expected to remain sensitive to developments in Middle East, movements in crude oil prices and a series of key economic data releases this week, analysts said.


Market participants will closely track trade and inflation data from China and the US, consumer sentiment figures from Washington and India's Consumer Price Index (CPI) readings for cues on the direction of precious metals.


The European Central Bank's monetary policy decision will also be in focus as investors assess its implications for bullion and other commodities.


"Momentum for precious metals such as gold and silver still looks corrective," Pranav Mer, Vice President, EBG -- Commodity & Currency Research, JM Financial Services Ltd, said.


Domestic bullion markets ended the previous week on a weak note. MCX gold futures for August delivery declined Rs 5,317, or 3.3%, to Rs 1.55 lakh per 10 grams, while silver futures for July delivery fell Rs 18,461, or 7%, to Rs 2.48 lakh per kilogram.


"Gold witnessed a weak performance last week as rising crude oil prices diverted market attention away from safe-haven assets," Jateen Trivedi, VP Research Analyst, Commodity and Currency, LKP Securities, said, PTI quoted.


He added that the strengthening rupee against the US dollar added further pressure on precious metals.


"As a result, domestic bullion underperformed than its international counterpart, with currency gains offsetting part of the support from global gold prices," Trivedi said.


In international markets, Comex gold futures fell USD 227.7, or 5%, to close the week at USD 4,365 per ounce, while silver dropped USD 6.77, or nearly 9%, to USD 69.10 per ounce.


Gold prices remained under pressure in overseas markets and ended the week down nearly 5%, while silver also witnessed a sharp correction in line with weakness in industrial metals, Mer said.


"Stronger-than-expected US PMI and labour market data reinforced expectations of higher-for-longer interest rates, while a firm US dollar and exchange traded fund outflows weighed on bullion," he added.


Analysts also pointed to indications from Russian and Ukrainian leaders that the conflict could move towards a resolution, reducing safe-haven demand for precious metals.


Looking ahead, Trivedi said gold and silver could remain under pressure if international gold prices stay below the USD 4,400-4,500 per ounce range.


"Going ahead, precious metals may remain vulnerable if international prices stay below the USD 4,400-4,500 per ounce range, while a firm rupee, elevated crude oil prices and cautious investor sentiment could cap any sharp recovery," he said.