Geopolitical woes fuel gold's appeal; silver prices likely to be volatile

Gold prices rose slightly on Tuesday as safe-haven demand remained intact amid ongoing geopolitical tensions in the Middle East. 

Prices had briefly eased earlier in the session due to a stronger dollar against a basket of major currencies.

A stronger dollar makes commodities priced in the greenback more expensive for overseas buyers. 

The dollar maintained its position near the five-week high it reached on Monday, underpinned by strong demand and general market caution. 

“Rising geopolitical tensions continue to benefit the USD's status as the global reserve currency,” Haresh Menghani, editor at FXStreet said in a report. 

“Adding to this, reduced bets for aggressive easing by the Federal Reserve (Fed) further undermines the USD and contributes to the intraday selling around the the non-yielding gold.”

Geopolitical tensions reinforces safe-haven appeal

Despite a stronger dollar, safe-haven demand for gold remained strong, according to experts. 

Iranian media reports indicated that a senior official from the Islamic Revolutionary Guard Corps (IRGC) announced the closure of the Strait of Hormuz. 

The official further issued a warning that Iran would open fire on any vessel attempting to navigate the strategic waterway.

This is Iran's clearest warning yet, issued since its Saturday announcement that it was closing the export route.

Such a closure poses a serious threat, potentially choking off a fifth of the world's oil flows and causing a sharp increase in crude prices.

President Donald Trump of the US has cautioned about an impending "big wave" of further attacks, although he did not offer any specific information.

The war triggered by the attack on Iran has plunged the Gulf region into conflict, resulting in numerous civilian deaths across Iran, Israel, and Lebanon. 

Furthermore, the conflict has paralysed global air transport and halted shipping traffic through the Strait of Hormuz.

At the time of writing, the COMEX gold contract was at $5,338.64 per ounce, up 0.5%.

“Gold price action remains comparatively more stable, consistent with its role as the preferred hedge in a risk‑off environment,” Ewa Manthey, commodities strategist at ING Group, said in a note.  

Silver slides

Meanwhile, silver prices remained volatile, with prices experiencing a drop of more than 3% at one point in the Asian trading on Tuesday. 

Silver experienced significant volatility, first spiking to just under $100 per ounce during Asian trading, before sharply falling to approximately $86 an ounce.

The COMEX silver contract last traded at $87.410 per ounce, down 1.7%. 

“This suggests near-term profit-taking following the recent outsized move,” Manthey said.

“Relative to gold, silver continues to exhibit significantly higher volatility, with positioning and thinner liquidity amplifying intraday swings,” she added. 

Meanwhile, the United States is bracing for a significant escalation in attacks within Iran over the next 24 hours, according to a statement from US Secretary of State Marco Rubio. 

This warning follows Trump's assertion that a "big wave is yet to come".

In light of these grave safety concerns, the State Department has urgently advised US citizens to immediately leave countries across the Middle East.

Against such a backdrop, experts see silver prices remaining volatile as the commodity is an industrial metal and is also considered a safe-haven asset.