Gold, silver may see more corrective moves this week as Middle East tensions, central bank cues drive volatility

Gold and silver prices are likely to remain volatile and could see further corrective moves in the coming week, with investors closely watching developments in the Middle East conflict and a packed calendar of major central bank policy meetings, analysts said.

Market participants are expected to remain focused on the evolving geopolitical situation, as any sign of escalation or de-escalation in the Middle East could trigger sharp swings across commodities, currencies and broader financial markets.

Analysts said traders will continue to track the conflict in the Middle East closely, with geopolitical headlines likely to remain the biggest short-term driver for bullion prices.

“In the week ahead, focus will remain in the Middle East region as any signs of further escalation or de-escalation may lead to increased volatility in the financial markets,” Pranav Mer, vice president, EBG – commodity & currency research at JM Financial Services Ltd, was quoted as saying by news agency PTI.

While gold and silver are traditionally seen as safe-haven assets during times of crisis, recent sessions have shown that broader market stress can also lead to profit-booking and cash-raising, which can weigh on prices even when geopolitical risks remain elevated.

On the macroeconomic front, investors will also monitor a heavy lineup of central bank meetings this week.

The US Federal Reserve will announce its policy decision on Wednesday, followed by the European Central Bank and the Bank of England on Thursday, and the People’s Bank of China on Friday.

These central banks are widely expected to keep interest rates unchanged, but traders will be closely watching their forward guidance for clues on the path of global monetary policy, especially at a time when higher crude oil prices are complicating inflation expectations.

Bullion prices remained under pressure in domestic markets last week.

On the Multi Commodity Exchange (MCX):

In the international market, Comex silver dropped nearly $3, or 3. 52%, during the week, while gold fell $97, or 2%.

Mer told PTI that gold broke down from a consolidation range on Friday and ended the week nearly 2 per cent lower, dragged by a stronger US dollar and growing expectations that major central banks may delay interest rate cuts because of the inflationary impact of surging crude oil prices.

The fall in bullion prices came even as equities and other risk assets saw broad pressure.

According to PTI, Mer said gold prices slipped despite a wider sell-off in risk assets because traders and investors may have chosen to book profits at higher levels or sold holdings to meet margin calls and liquidity needs.

Still, he said bullion continues to retain an important support base from safe-haven demand because of the escalating conflict in the Middle East.

“Silver prices closed in negative for the second consecutive week, weighed by a stronger dollar and a consolidative/ corrective move in the industrial metals,” Mer told PTI.

Despite near-term volatility, analysts said gold and silver continue to play an important role in portfolio construction.

“Gold and silver earn their place not because of what they return in isolation, but because of how they behave relative to everything else,” Vijay Kuppa, CEO of InCred Money, said, as per PTI.

He said the two metals remain valuable because of their low correlation with equities and their ability to act as a hedge against currency debasement.

Kuppa also cautioned investors against trying to time the market, saying that while broader commodity markets have been disrupted by supply chain issues and changing trade routes amid the conflict, investors should maintain a long-term allocation to bullion rather than chase short-term price swings.