Geopolitical tensions are driving risk-off sentiment, causing investors to move away from the stock markets and focus on safe havens like gold and silver. Precious metals enjoyed record gains early this year, rebounding sharply amid Trump’s rate moves and other uncertainties before experiencing any correction.
Expect volatility in precious metals
Gold and silver prices are expected to remain highly volatile, with a gap in the opening session tomorrow, as the conflict in the Middle East, with renewed US and Israeli military action against Iran, continues to dominate global risk sentiment, says Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities.
“A sharp escalation of hostilities, with coordinated strikes and retaliatory actions, fuels uncertainty and reduces hopes for a quick diplomatic resolution. This heightened geopolitical risk could drive investors to traditional safe havens such as gold and silver, and generally expect an opening of a rift for gold markets,” he said.
As global equities and risk assets come under pressure, capital tends to shift to precious metals, which act as a hedge against uncertainty, the analyst explains. “Previous moves have already pushed gold and silver prices higher in recent sessions, and this momentum could continue if the conflict intensifies further. Energy markets are also reacting, with crude oil prices rising on fears of supply disruption through key routes such as the Strait of Hormuz, further increasing the sense of risk and supporting interest in gold,” he further said.
Also Read: Crude Oil Price Crosses $100? What experts predict after the US and Israel attack on Iran
Profit booking follows?
However, the impact may not be uniform. If there are signs of diplomatic developments or indications of de-escalation, precious metals could see gains after an initial peak of 3-6%, Trivedi said.
“We expect the ongoing rally in US Treasuries, oil, gold and silver to continue. For India, the impact is generally larger: higher crude oil prices will widen the current account deficit, fuel domestic inflation, put pressure on the rupee and could lead to FII outflows as global investors reduce risk exposure,” said Nachiketa Sawrikar, fund manager at Artha Bharat Global Multiplier Fund.
Gold rose to near a one-month high on Friday, trading at $5,230.56 an ounce. US gold futures for April delivery settled at $5,247.90. The increase represented a gain of 7.6% for February this year.
Silver also rose, with spot prices rising 4.8% to $92.60 an ounce, for a monthly gain of 9.7%. Platinum rose to $2,350.34 an ounce, while palladium fell slightly to $1,775.31.
Bears are likely to take control of Dalal Street
Indian capital markets are expected to see a gap-down opening tomorrow amid rising uncertainties. Ashish Anand, partner at Fortuna Asset Managers, said financial markets are likely to experience risk-taking behavior along with foreign financial institutions possibly selling shares as market prices experience intense and rapid price changes throughout the day.
Will Sensex and Nifty react amid the escalating war in the Middle East after Khamenei’s assassination?
“Our advice to investors is simple: avoid panic decisions. Companies should implement volatility as a strategic tool, which should be handled with care. People who want to invest for the long term should keep their Systematic Investment Plans (SIP) going and allocate their money among reliable, strong and fundamentally strong companies. A person should follow asset allocation rules including stocks, gold and bonds as these guidelines help through unpredictable market times. We believe that wealth is built through discipline, not reaction, and the key theme would be “Patience over pace,” says Ashish Anand, Partner, Fortuna Asset Managers.
(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of The Economic Times)
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