Gold, silver prices fall sharply after fresh US-Iran escalation—Check what triggered the sell-off

Gold prices declined sharply in the international markets on Thursday, 28 May, as a stronger US dollar and fresh US attacks on Iran triggered volatility across global commodity markets. Investors also remained worried that rising geopolitical tensions could keep inflation elevated for a longer period.

Spot gold fell 1.54 per cent to $4,382.02 per ounce as of 11 am. US gold futures for June delivery also slipped 1.6 per cent to $4,377.10 per ounce.

Silver prices also remained under pressure. Spot silver declined 2.86 per cent, or $72.39, per ounce during the session.

Why gold and silver prices are falling

The biggest trigger behind the fall in bullion prices was the strengthening of the US dollar, which made dollar-priced commodities like gold more expensive for holders of other currencies.

The pressure intensified after fresh US military strikes in Iran targeted what officials described as a military site threatening American forces and commercial shipping activity near the Strait of Hormuz. The strikes came only hours after US President Donald Trump dismissed reports suggesting a possible agreement with Iran to restore smooth traffic movement through the strategically important waterway.

The escalation pushed crude oil prices nearly 3 per cent higher in early Asian trade on Thursday, further fuelling concerns that energy-driven inflation could accelerate again.

Even though geopolitical conflicts typically boost safe-haven demand for gold, the current situation has created a more complicated environment for investors. Rising oil prices are increasing fears that inflation could remain stubbornly high, reducing expectations for aggressive interest rate cuts from central banks.

Fed comments add to inflation worries

Federal Reserve Governor Lisa Cook added to those concerns on Wednesday when she said the US central bank should keep short-term interest rates steady for now. However, she also warned that tariffs, the Iran conflict, and a surge in artificial intelligence-related investments were increasing price pressures, and the Fed could consider raising rates if necessary.

Higher interest rates generally reduce the appeal of non-yielding assets like gold and silver.

Meanwhile, the Hong Kong Futures Exchange announced on Wednesday that it would introduce market-wide trading fee discounts and incentive programmes for gold futures contracts in an effort to improve liquidity and revive market participation.

Key US data in focus

Investors are now awaiting key US macroeconomic data including ADP employment numbers, GDP data, and the Personal Consumption Expenditures (PCE) inflation gauge for fresh cues on the Federal Reserve’s interest rate outlook and its impact on bullion demand.

Back home, Indian commodity markets remained closed on Thursday, May 28, on account of Bakrid. Trading activity in domestic bullion markets is expected to resume in the next session.

(As of 27th May Closing)