Gold, silver retreat: How strong dollar, rates are driving the move

Gold and silver prices edged lower on Thursday (March 19) in global markets, weighed by a firmer US dollar and persistent concerns over higher interest rates, even as geopolitical tensions and festive demand in India helped limit deeper losses.

On the COMEX, gold was trading at $4,847.50 per ounce, down nearly 1%, while silver declined 1.87% to $76.14 per ounce in early trade. The pullback comes after bullion prices hovered near all-time highs in recent sessions.

Why prices are slipping

The primary pressure on precious metals stems from a stronger dollar and hawkish signals from the Federal Reserve, which indicated limited scope for rate cuts this year. Higher interest rates typically reduce the appeal of non-yielding assets like gold and silver.

The dollar index has strengthened notably since the escalation of the US-Israel-Iran conflict, as investors increasingly flock to the greenback as a safe-haven asset, capping gains in bullion.

Geopolitics, oil shock keep floor intact

At the same time, rising geopolitical risks are preventing a sharper fall. The conflict in West Asia has intensified, with Iran and Israel targeting energy infrastructure, pushing crude oil prices sharply higher. Brent crude climbed above $111 per barrel, raising fears of inflation and slower global growth.

Market experts say this combination of geopolitical uncertainty and inflation risks continues to underpin gold.

Ross Maxwell, Global Strategy Operations Lead at VT Markets, noted that gold remains supported by “inflation concerns, elevated sovereign debt levels, and geopolitical uncertainty,” although much of the upside may already be priced in.

Central banks, volatility add support

Another structural support for gold comes from continued diversification by central banks into bullion reserves, along with periodic volatility in equity and currency markets.

However, Maxwell cautioned that higher real interest rates, a stronger dollar, and improving economic stability could act as headwinds, limiting further sharp upside.

Festive demand in focus: Gudi Padwa boost

Back home, physical demand is expected to remain resilient due to Gudi Padwa, considered an auspicious time for gold purchases.

Rajesh Rokde, Chairman of the Gem & Jewellery Council of India, said, “On the auspicious occasion of Gudi Padwa, jewellers across India are anticipating healthy sales despite the prevailing high gold prices. Gold purchases during this festival are deeply rooted in tradition, and consumers continue to see it as a symbol of prosperity and good fortune. While price levels remain elevated, we expect buyers to adapt by choosing lighter ornaments, contemporary designs, and diamond-studded jewellery.”

He added that the ongoing wedding season alongside festive buying will help sustain demand.

-With agencies inputs

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Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Readers should consult certified experts before making any investment decisions.