Gold Price Prediction: Inflation and Geopolitical Tensions Fuel Market Volatility
Gold prices are poised for significant movement in the coming weeks, driven by inflation projections and expectations of interest rate cuts, according to Maneesh Sharma, AVP - Commodities & Currencies at Anand Rathi Shares and Stock Brokers. This analysis comes as gold recorded one of its sharpest weekly losses in recent years, with spot prices plunging to four-month lows around $4,099 per ounce.
Key Factors Behind the Recent Decline in Gold Prices
The recent downturn in gold prices can be attributed to several interconnected factors:
- Higher Oil Prices and Inflationary Fears: Elevated oil prices have sparked concerns about rising inflation, leading to expectations that central banks may implement rate hikes to curb economic overheating.
- Rising US Treasury Yields: US 10-year yields have climbed from 3.93% on March 3 to 4.37% today, making non-yielding assets like gold less attractive to investors.
- Strong US Dollar: The US Dollar (USD) trading steadily above 99 continues to limit upside potential for gold, as a stronger dollar typically pressures dollar-denominated commodities.
Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), warned earlier in March that a sustained 10% increase in oil prices over a year could push global inflation up by 40 basis points, further complicating the monetary policy landscape.
Geopolitical Developments and Market Implications
Geopolitical tensions, particularly involving Iran, Israel, and the US, are adding layers of complexity to the gold market. Iran has denied holding talks with the US to end the conflict, contradicting remarks by former US President Donald Trump. Mohsen Rezaei, a senior military adviser to Iranian Supreme Leader Mojtaba Khamenei, stated that the war will continue until Iran receives full compensation for damages.
These developments, coupled with reports of renewed pressure on Iran's energy infrastructure and the effective closure of the Strait of Hormuz, are supporting crude oil prices. A prolonged conflict risks prompting emerging market central banks to allocate fewer funds to gold purchases this year, as resources may be redirected toward elevated oil purchases and liquidity injections through measures like quantitative easing to stimulate economic growth.
Central Bank Activity and Investor Behavior
Global central banks continued to buy gold in January, with net purchases of 5 tonnes. However, momentum has eased at the start of the year, compared to a monthly average of 27 tonnes seen in 2025. The recent weakness in bullion has been exacerbated by forced selling, as investors liquidate gold positions to cover losses in other parts of their portfolios, rather than due to a deterioration in gold's longer-term fundamentals.
Gold and Silver Price Outlook for International Markets
Weekly View: Spot Gold (Current Market Price: $4,410 per ounce) is expected to remain volatile this week, with a downside bias over the next 1-2 weeks. Spot Silver (CMP: $70.10 per ounce) may see a bounce toward $73-74 per ounce, but this presents a selling opportunity for the same period.
Both gold and silver have reversed the upward trend observed since the beginning of the year. Spot Gold's bounce from a four-month low below $4,100 appears unsustainable on a weekly basis, with upside resistance identified in the $4,520-$4,570 per ounce range. A 10-15% decline in spot prices toward $3,800-$3,750 per ounce over the next 1-2 weeks cannot be ruled out if oil prices continue to rise amid prolonged geopolitical tensions.
Support for Silver is pegged around $56-$58 per ounce in spot markets, while resistance remains near $73-$74 per ounce. Gold has fallen every week since the conflict began on February 28, as elevated energy prices and geopolitical risks are increasingly offset by higher real yields and a firmer dollar. Consequently, gold's direction will depend less on geopolitical headlines alone and more on how these events shape inflation, monetary policy expectations, and real interest rates.
Disclaimer: Recommendations and views on the stock market, other asset classes, or personal finance management tips given by experts are their own. These opinions do not represent the views of The Times of India.
