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A sudden and major earthquake in the global geopolitical landscape has shaken financial and commodity markets across the world, including India. The tension of war in West Asia has once again reached its peak after US President Donald Trump said that the ongoing interim peace agreement (Ceasefire Deal) between America and Iran is ‘completely over’. Crude oil prices have surged by more than 5% following fresh military clashes between the two countries in the strategically important waterway ‘Strait of Hormuz’. Due to oil becoming expensive, the fear of increasing inflation at the global level has deepened, due to which investors have started booking huge profits in gold, which is considered a safe investment. As a result, there has been a huge fall in gold prices both in the international and Indian futures markets (MCX).
Spot and futures gold fell flat in the international market
After this strong statement of the US President, sharp selling of gold prices was seen in the international bullion market on Wednesday.
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Spot Gold: Spot gold in international market with big fall of 1.2% $4,057.09 per ounce But he came.
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Comex Gold Futures: Gold for August delivery fell heavily by $94.69 (2.28%) in the US futures market. $4,062.71 per ounce But appeared to be doing business.
Due to this, there was a huge fall of 4% to 8% in the shares of big companies mining precious metals in London and global markets.
Gold fell by ₹2,308 in Indian futures market (MCX)
Due to weak and disappointing signals from global markets, gold prices crashed badly in the Indian domestic futures market also. Multi Commodity Exchange (mcx) with a big fall of Rs 2,308 (1.59%) for August delivery. Rs 1,43,084 per 10 grams Came to the level of. Amidst the huge commotion in the market, a record huge commodity turnover of 10,440 lots was recorded during Wednesday’s session.
Why is the pressure on gold increasing? Understand market mathematics
Generally, whenever there is a situation of war or tension in the world, the prices of gold increase because it is considered the safest investment (Safe-Haven Asset). But this time the market mathematics is working a little differently:
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Crude oil surge and inflation: Due to the West Asia crisis, the prices of Brent crude and WTI crude oil have suddenly increased by more than 5%. This rise in crude oil can again fuel inflation across the world.
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Pressure on Federal Reserve to increase interest rates: If inflation increases due to rising energy prices, the pressure on the US central bank ‘Federal Reserve’ to keep interest rates high for a long time or increase them again will increase.
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Strong dollar pressure: The US Dollar Index has gained huge strength amid expectations of rising interest rates and global uncertainty. Since gold is traded in dollars in the international market, a stronger dollar and higher interest rates weaken the demand for non-interest bearing assets such as gold. This is the reason why investors have started withdrawing money from gold and investing it in dollars and other assets.
Experts’ opinion: Gold stands at a very important juncture
According to Lukman Otunuga, head of market research at foreign brokerage firm FXTM, gold is currently standing at a very delicate and important juncture in the global market. The geo-political tension in West Asia is certainly providing a fundamental support to gold as a safe haven investment, but if this rise in crude oil prices increases inflation and there are signs of tight monetary policy from the US Fed, then this pressure and downward trend on gold prices may continue in the coming days. Traders’ eyes are now on US economic data and minutes of the upcoming Federal Reserve meetings.