Precious metals had a tough week. Gold futures slipped a little over 2%, and spot gold lost around 3%. Silver fared far worse — spot silver sank nearly 8%, and Comex silver futures dropped close to 6.6%. This was one of the steepest weekly falls the sector has seen in months, and it happened for an odd reason: a widening war in the Middle East actually pushed prices down instead of up. Crude oil surged almost 13% during the week as the US and Iran traded repeated attacks, and Tehran kept threatening to block the Strait of Hormuz. That jump in oil revived worries about inflation right when markets had begun expecting Fed rate cuts. Traders decided that if the Fed has to fight an oil-driven inflation problem, it will keep rates high for longer — and that thinking hurt gold and silver, even as geopolitical tension kept rising.

Economic Data & Fed Commentary

The economic data sent mixed signals, but the overall tone leaned hawkish for interest rates. June’s CPI and PPI numbers both came in lower than expected, mainly due to cheaper energy, which gave bullion brief support early on. That relief didn’t last: retail sales met forecasts, jobless claims dropped to a two-month low of 208K, and University of Michigan inflation expectations barely moved down. Fed Chair Kevin Warsh sounded hawkish in his Congressional testimony, Dallas Fed President Lorie Logan openly pushed for another rate hike, and Vice Chair Philip Jefferson said he’d support tighter policy if inflation doesn’t improve soon. Markets now see roughly a 50% chance of a September hike — a major shift that weighed heavily on metals all week.

Geopolitical Tensions

The Middle East stayed the biggest story. The US struck Iranian military sites for a sixth straight night, Iran hit back at US bases in the region, and again threatened to shut the Strait of Hormuz — a passage carrying about a fifth of the world’s oil. President Trump warned the US might target Iranian infrastructure if diplomacy fails. Instead of triggering the usual safe-haven rush, markets are reading this conflict as an inflation risk through oil prices — a reminder that gold can swing from “safety trade” to “real-yield risk” depending on how the crisis affects the economy.

Central Bank Buying, ETFs & Retail Demand

Central banks kept buying despite falling prices. China’s central bank added gold for a 20th consecutive month — its biggest monthly purchase since December 2024 — while Poland, Kazakhstan, and Uzbekistan also kept stocking up. A World Gold Council survey found 89% of central banks expect global reserves to keep growing over the next year. But Western gold ETFs kept losing holdings, down over 2.5% for the year as large funds cut exposure ahead of the rate hike. Meanwhile, Comex inventories fell to their lowest since October 2024, suggesting physical supply is tightening. In India, jewellery demand stayed weak at these high prices, and silver imports for April–June fell more than 42% year-on-year, showing buyers are cautious and waiting for better prices.

Outlook

Sentiment stays cautious-to-bearish for now, with the market pulled between geopolitical risk on one side and hawkish rate expectations on the other. The World Gold Council’s valuation model still places fair value near $4,100, meaning this week’s drop could draw in value buyers and central banks. But if oil prices rise further or a September rate hike gets confirmed, the correction could deepen toward key support levels — $3,950-4,000 for gold and $50-55 for silver.

Gold’s direction still depends on how the US-Iran conflict unfolds. If prices stay below the $4,000 (~₹1,41,000) support level, it could open the door to a steeper decline, possibly down to $3,900 (~₹1,38,000). On the flip side, if prices hold above $4,200, a fresh upward trend could begin, aiming for $4,500 (~₹1,55,000).

Silver remains in a no-trade zone for now. A sustained break above $63 (~₹2,35,000) could send it toward $70–71 (~₹2,51,000–2,55,000), while a drop below $55 (~₹2,14,000) could pull it down to $50 (~₹2,00,000)

Dr.Renisha Chainani, Head- Research, Augmont