Gold and silver head for volatile week amid crude oil spike, West Asia worries

Gold and silver are set for a volatile week as geopolitical tensions in West Asia, crude oil prices nearing $110 per barrel, and fluctuations in the Indian rupee influence bullion sentiment, according to analysts. Investors will initially monitor Chinese economic indicators, followed by US housing data, consumer sentiment, inflation expectations, and PMI readings from key economies like India, the UK, and the US. The commodity markets will be closed on Tuesday morning due to Dussehra.

Gaurav Garg, Head of Research at Lemonn, anticipates a "capped, choppy week" as gold and silver remain volatile due to mounting tensions around the Strait of Hormuz, which impact crude oil prices. Brent crude prices have surged near $110 per barrel globally, which could temper gold's upward potential, while easing US Treasury yields may offer some support.

On the Multi Commodity Exchange (MCX), gold futures for December delivery fell ₹3,581 (2.4%) to ₹1.47 lakh per 10 grams, while silver dropped ₹14,568 (6.4%) to ₹2.11 lakh per kilogram.

The weakening rupee has been a major factor in the decline of domestic gold prices, as it soared to 94.8 from 96.8, a gain of more than 180 paise in five sessions, aided by RBI intervention and traders unwinding dollar positions. This rupee appreciation reduced the landed cost of imported gold, causing domestic prices to drop by over ₹3,000 per 10 grams over four sessions.

Silver, however, was more sensitive to concerns over interest rates and economic growth, falling sharply before stabilizing at around ₹2.11 lakh per kg. Traders were more affected by currency movements than by uncertainties surrounding the US Federal Reserve's rate outlook.

In global markets, Comex gold futures for the December contract fell by $35.2 (1%) to $4,181.1 per ounce, while silver slipped $3.7 (6.13%) to $57.30 an ounce. These futures markets consolidated in a range on Friday but showed a positive bias from short covering and bargain buying at lower levels, according to Pranav Mer, Senior Vice President, EBG - Commodity & Currency Research at JM Financial Services Ltd. The dollar's trajectory, Russian crude supplies developments, and geopolitical risks will also be closely watched for energy markets in the coming week, as movements in crude prices will affect inflation expectations and the outlook for precious metals.