COMEX gold, silver slip as rising oil prices fuel inflation concerns

Gold and silver prices traded lower on Wednesday (June 3) as renewed tensions in the West Asia pushed crude oil prices higher, raising concerns that inflation could remain elevated and keep interest rates higher for longer.

COMEX gold fell 0.38% to $4,502.90 per ounce, while COMEX silver declined 0.74% to $75.00 per ounce in early trade.

The weakness in precious metals came as oil prices rose more than 1% after fresh hostilities in the Gulf region heightened concerns over energy supplies.

Higher crude prices can fuel inflation, reducing the appeal of non-yielding assets such as gold and silver if investors expect central banks to maintain a tighter monetary policy stance.

Market sentiment was also influenced by comments from Cleveland Federal Reserve President Beth Hammack, who said the US central bank may need to raise interest rates if inflation pressures continue to build. Higher interest rates generally weigh on bullion by increasing the opportunity cost of holding precious metals.

Investors are now awaiting a series of US economic indicators, including JOLTS job openings data and Friday's nonfarm payrolls report, for further clues on the Federal Reserve's policy path.

Jateen Trivedi, VP Research Analyst – Commodity and Currency at LKP Securities, said that traders will continue to monitor developments around the US-Iran situation, along with key US economic data, for further direction in gold prices.

Analysts expect precious metals to remain volatile as investors assess geopolitical developments and incoming economic data.

Kaynat Chainwala, AVP Commodity Research at Kotak Securities, said gold and silver are likely to trade within a broad range as markets weigh developments in the West Asia against expectations for US interest rates.

"Gold and silver are likely to trade in a wide range as investors watch US-Iran developments and look ahead to key economic indicators, including JOLTS job openings, comments from Federal Reserve officials and Friday's (June 5's) nonfarm payrolls report, for cues on the interest-rate outlook," she said.

Meanwhile, India has tightened restrictions on silver imports

by adding grain and powder forms to the restricted category and requiring prior import authorisation. The move is aimed at curbing imports of the precious metal and easing pressure on the rupee.

Market participants are also monitoring developments in global bullion trade after Swiss customs data showed the country's gold exports fell 20% month-on-month in April, as weaker shipments to Britain and China outweighed stronger deliveries to India and Hong Kong.

-With Reuters inputs