While Indian markets are closed for Muharram, silver prices are experiencing a sharp decline in the international market. Today, Friday (June 26), there is a significant change in the prices of gold and silver on COMEX. COMEX silver saw even more heavy selling, falling 4.44 percent to $55.77 per ounce, compared to its previous close of $58.025 per ounce.
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Meanwhile, Comex gold was trading at $4,002.80 per ounce, down $44.80, or 1.11 percent. It also touched a low of $4,001.20 per ounce during the trading session.
This decline marks the fourth consecutive weekly loss for gold. Recent US inflation data has made it clear that price pressures remain, shifting investor attention to the Federal Reserve’s policy direction.
Why are gold and silver prices falling?
News of sluggish Chinese demand: China’s net gold imports through Hong Kong fell by nearly 38 percent in May, according to a Reuters report . This indicates weakening physical demand from one of the world’s largest gold consumers. News of lower Chinese demand also negatively impacted the global gold market.
Inflation Raises Fed Concerns: Data released on Thursday (June 25) showed that US inflation surpassed the 4 percent mark in May for the first time in three years. This was primarily due to rising energy prices due to tensions in West Asia. This sharp increase in inflation strengthens expectations that the Federal Reserve may continue to tighten its monetary policy.
Federal Reserve Tightens Stance: Fed officials have also adopted a cautious stance. Chicago Fed President Austan Goolsbee said that despite some improvement in service sector inflation, inflationary pressures remain elevated. Meanwhile, New York Fed President John Williams clarified that inflation remains well above the central bank’s 2 percent target.
According to CME FedWatch data, traders now expect three interest rate hikes this year. Rate hike expectations in September have risen sharply over the past week. Rising interest rates have a direct impact on non-interest-bearing assets like gold and silver, as investors shift to interest-bearing assets.
Strong dollar adds to price pressure: The US dollar index is rising for the second consecutive week, signaling another negative outlook for gold and silver. A stronger dollar makes gold and silver more expensive for buyers of other currencies, depressing demand and driving down prices. Furthermore, a stronger dollar impacts investor risk appetite in global markets.
Geopolitical tensions impact markets: Geopolitical tensions also remain a concern for investors. The United Nations’ International Maritime Organization (IMO) has suspended escort operations for ships through the Strait of Hormuz following reports of an attack on a ship. This incident has raised new uncertainties about the fragile US-Iran peace agreement. Such incidents threaten to disrupt global supply chains, which could increase market volatility.
Eyes on US PCE data: Market participants are now closely monitoring the upcoming US PCE (personal consumption expenditures) inflation data. This data could provide additional clues to interest rate expectations and the direction of precious metals. PCE is considered the Federal Reserve’s preferred inflation measure, so its data could have a significant impact on the market.
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