Gold drops 3% to Rs 1.61 lakh on MCX, silver tumbles 6%; why bullion is falling amid Gulf conflict

Gold and silver prices witnessed sharp declines on Tuesday, March 3, as a strengthening US dollar triggered profit-booking in global bullion markets, offsetting safe-haven demand arising from the escalating US–Israel–Iran conflict.

On the international front, Comex gold was trading 1.84% lower at $5,213.90 per ounce as of 6:09 pm IST (12:39 pm GMT). Comex silver fell a steeper 7.47% to $82.22 per ounce. In the spot market, gold slipped 1.4% to $5,252.05 an ounce, while US gold futures for April delivery were down 0.9% at $5,263.80. Silver declined 6.5% to $83.63 an ounce after hitting a four-week high in the previous session.

Despite heightened geopolitical uncertainty, traders appeared to book profits following the recent rally in precious metals. Market participants are closely monitoring the US dollar’s strength and upcoming US macroeconomic data, both of which could drive near-term volatility in bullion.

Sharp domestic correction

The Multi Commodity Exchange (MCX) resumed trading in the second half on Tuesday after remaining closed during the morning session due to the Holi holiday.

MCX gold futures for April expiry opened sharply lower, falling 3% to ₹1,61,092 per 10 grams compared with the previous close of ₹1,66,074. Silver prices saw a deeper cut, dropping 6% to ₹2,61,773 per kilogram.

In the previous session on Monday, MCX gold had closed 2.53% higher at ₹1,66,199 per 10 grams, while silver ended in the red at ₹2,80,090 per kg. The sharp reversal reflects global cues and post-rally consolidation.

Technical levels

Ponmudi R, CEO of Enrich Money, noted that gold continues to hold above key moving averages, hovering near the resistance zone of its prior all-time high, indicating underlying strength despite the correction.

He highlighted that COMEX gold is currently consolidating within the $5,300–$5,500 range, with strong buying interest visible in the $5,100–$5,200 support band. A sustained move above the $5,500–$5,600 zone could pave the way for fresh record highs.

Structural drivers

Market experts suggest that while geopolitical tensions have acted as a catalyst, the broader bullish framework for precious metals remains intact.

Harshal Dasani, Business Head at INVasset PMS, said a diplomatic breakthrough in US–Iran tensions could lead to a short-term correction in gold and silver, but would not alter the structural trajectory. He pointed to continued central bank buying, de-dollarisation trends, fiscal expansion in major economies and ongoing geopolitical fragmentation as key long-term drivers supporting bullion.

Silver and volatility

Silver, in particular, is expected to remain volatile in the near term. Ross Maxwell, Global Strategy Operations Lead at VT Markets, said silver could react sharply to developments in the US–Israel–Iran conflict and currency movements.

He noted that any threat to Middle East energy supply routes could push crude oil prices higher, stoking inflation concerns and indirectly supporting silver as an inflation hedge. However, a stronger US dollar could cap gains in the short term.

While industrial demand remains supportive over the medium term, analysts caution that near-term price direction will largely depend on geopolitical headlines and shifts in global risk sentiment.