Friday, January 20, showed improvements in the domestic futures market in both gold and silver prices as a result of the rising tensions in the geopolitical relations between the United States and Iran. Nonetheless, the yellow metal yields were little because the dollar index gained in a 4th consecutive session.

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Gold April futures were trading at 0.20% at 155,110 per 10 grams on the Multi-Commodity Exchange (MCX) at 9:45 am. MCX silver March contracts gained 0.65% at ₹242,974 per kg during the same period.

Dollar Index Gains Strength in Fourth Consecutive Session

The dollar index came to the 98 level and stretched the gains of the fourth session in succession, and increased by over 1% this week. The index is set to record the highest weekly gains since the beginning of October, propelled by good economic news in the U.S. and hawkish overtures by the U.S. Federal Reserve.

The appreciation of the dollar will render dollar-denominated commodities like gold more costly to foreign consumers, which reduces demand and restricts momentum to the upside. According to exchange data, the movement of currencies still had an effect on the early trade in bullion prices.

Demand for Bullion is Based on Geopolitical Tensions

The tensions between the U.S. and Iran have also been escalating, and reports in the media show that the U.S. might attack Iran during the weekend, but this has not yet been decided. The problem of increased geopolitical risks is usually associated with higher demand for safe-haven currencies like gold.

Federal Rate Anticipations and Economic Statistics in the U.S.

The anticipation of the U.S. Federal Reserve rate reduction has been undermined. The released data of the U.S. jobless claims weekly on Thursday was at its lowest in the past five weeks, which shows stability of the labour market.

As it is indicated by the CME Fedwatch Tool, there is a 50% likelihood of a rate reduction at the Federal Reserve's June policy meeting by market players. According to the minutes of the January Federal Open Market Committee (FOMC) meeting, the policymakers were still divided regarding the next action on interest rates, even though some of them still preferred to increase it further in case inflation is high.

Investors are also waiting for the preliminary estimates of fourth-quarter GDP performance, and the Personal Consumption Expenditures (PCE) price index report, the Fed-preferred indicator of inflation, to give them further guidance on the direction the central bank is taking its policy.

Gold and Silver on MCX Important Levels

According to market levels, MCX gold April futures were observed to trade between ₹1,56,000 and ₹1,53,500 per 10 grams and had a support of around ₹1,53,500 per 10 grams.

Gold and silver prices were not stable, even with changes in the index of dollar index and the continued geopolitical tension between the U.S. and Iran. At MCX, gold was observed to be supported at ₹1,53,150 and ₹1,52,200, and the level of resistance was set at ₹1,55,800 and ₹1,57,500.

According to the existing market data, Silver was trading at ₹236,600 and ₹231,000 on both supports of ₹24,5500 and ₹25,1000, respectively.