Gold and silver futures reverse initial gains despite mounting Middle East tensions—What investors should know

Domestic gold and silver futures retreated after securing initial premiums in Wednesday's (July 8) volatile trade as investors weighed updates on fresh developments in the Middle East after US President Donald Trump announced that the ceasefire established between Washington and Tehran last month was now "over".

The POTUS asserted that the US was no longer interested in engaging in talks with Iran for a long-lasting peace agreement, dashing nascent hopes of a permanent truce in the conflict that erupted again after the US launched strikes against Iran, accusing the Middle Eastern country of violating ceasefire rules.

Tehran launched retaliatory action against multiple countries in the region, adding to concerns about whether the Strait of Hormuz -- a maritime waterway crucial to the conflict -- will assume normal shipping operations in the near future.

The initial spike in both precious metals faded as traders appeared to prefer waiting for more clarity on the evolving geopolitical situation. Market veteran Ajay Bagga told Zee Business that financial markets have stopped treating Trump's remarks on Iran as a fresh catalyst for sustained risk aversion.

MCX gold and silver rates

On commodity derivative exchange MCX, gold futures (August 5 delivery) settled at Rs 1,43,650 per 10 grams on Wednesday, down by Rs 1,742 or 1.2 per cent for the day. Silver futures (September 4) closed at Rs 2,23,079 per kg, lower by Rs 358 or 0.2 per cent. Both witnessed sharp intraday swings.

Gold traded in a broad range of Rs 1,42,457-1,45,356 during the session, while the white metal circled between Rs 2,20,221 and Rs 2,30,916 before closing off the day's highs.

Most analysts said the precious metals initially gained as investors reacted to Trump's comments on Iran, but the momentum faded quickly as the market refrained from taking aggressive positions in the absence of fresh developments from the region.

Some say investors are now increasingly focusing on actual developments on the ground instead of reacting to every headline related to the conflict. This is why safe-haven buying appeared to remain short-lived despite renewed geopolitical concerns having their roots in the region.

According to Bagga, investor attention has gradually shifted towards improving supply conditions in the global oil market.

Dow crashes after a market-wide sell-off on Dalal Street

Earlier in the session, domestic equity benchmarks Sensex and Nifty50 plunged more than 2 per cent each amid a broad-based sell-off across sectors. On Wall Street, the Dow Jones Industrial Average (DJIA) slipped as much as 1.6 per cent before recovering some lost ground. The index was last seen trading about 1.1 per cent lower.
Rupee vs gold

Meanwhile, the rupee depreciated by 59 paise against the US dollar to close at a provisional 95.55.

Typically, a weaker rupee lends support to domestic bullion prices by making imported gold costlier. Wednesday's decline, however, reflected the dominance of global risk sentiment over currency-related support.

The dollar index -- which measures the strength of the American currency against six major peers excluding the rupee -- was last seen trading 0.1 per cent lower at 100.96.

Separately, India expressed concern over the evolving situation in the Middle East after reports suggested that Trump had warned of a major strike against Iran just hours after declaring the ceasefire to be over.

The developments come less than a month after Washington and Tehran had signed an interim 14-point agreement aimed at exploring negotiations for a permanent truce.