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Gold prices slipped on Monday as renewed U.S.-Iran hostilities pushed oil prices higher, while expectations of U.S. Federal Reserve interest rate hikes further weighed on the metal.

FUNDAMENTALS

Spot gold was down 0.5% at $4,067.99 per ounce, as of 0045 GMT. U.S. gold futures for August delivery lost 0.4% to $4,081.20.

Iran ‌launched missiles ⁠and drones ⁠at U.S. military sites in Kuwait and Bahrain early on Sunday, shortly after U.S. President Donald Trump threatened to wipe out the Iranian leadership if they did not stick to the agreement to end their war.

However, Tehran and Washington agreed to halt recent hostilities in the Gulf and renew talks regarding their dispute over the Strait ⁠of Hormuz, ‌Axios reported on Sunday.

Oil prices rose on Monday following days of tit-for-tat strikes by the United ⁠States and Iran in the Middle East that underscored the fragility of their interim peace deal and again slowed energy shipping in the Strait of Hormuz.

Data on Thursday showed that U.S. inflation accelerated in May, breaking above 4.0% for the first time in three years as the Middle East conflict boosted energy prices.
Traders expect three Fed rate ‌hikes this year and are pricing in an about 77% chance of a December increase, according to the CME FedWatch Tool.
Gold started trading ⁠at a premium in India last week for the first time in a month and a half, as a price correction lifted buying, while demand stayed subdued in top consumer China.
Gold speculators raised net long positions by 91 contracts to 113,010 in the week ended June 23.

Spot silver fell 1.1% to $58.49 per ounce, platinum gained 0.4% to $1,620.15, while palladium lost 0.4% at $1,204.25.

DATA/EVENTS

(GMT) 0900 EU Consumer Confid.Final June

New Delhi: The boards of state-owned Power Finance Corporation (PFC) and REC Ltd on Sunday approved the merger scheme between the two power sector financiers, with a share swap ratio of 88 PFC shares for every 100 shares of REC.

The approvals came after the board meetings of both companies concluded late on Sunday, paving the way for creating of India’s largest power sector financing institution with a combined loan book of more than Rs 11 lakh crore.

PFC owns a 52.6% stake in REC. The Centre owns 55.99% in PFC but doesn’t directly own a stake in REC.

“The share exchange ratio for the proposed merger of REC into PFC shall be 88 equity shares of PFC of Rs10 each fully paid up for every 100 equity shares of REC of Rs 10 each,” information on stock exchanges by the companies said.

The scheme provides for merger of the companies by absorption of REC into PFC with effect from April 1.

The merger will now require approvals from shareholders, stock exchanges, the Securities and Exchange Board of India (SEBI), the National Company Law Tribunal (NCLT) and other statutory authorities before becoming effective.
The Centre had announced plans to consolidate the two state-owned lenders to improve operational efficiency, strengthen their balance sheet and create a larger institution capable of meeting the power sector’s growing financing requirements.The merger process gathered pace after the boards of the two companies granted in-principle approval earlier this year. The government subsequently obtained the President’s approval to proceed with the amalgamation and appointed SBI Capital Markets as merchant banker and RBSA Valuation Advisors as the independent valuer for determining the share exchange ratio.

PFC and REC are focused on the power sector, funding generation, transmission, distribution, renewable energy, battery storage and other energy infrastructure projects. The combined entity is expected to play a larger role in financing India’s energy transition and the massive investment planned in electricity infrastructure over the coming decade.

The government in the FY27 budget announced that it seeks to achieve scale and improve efficiency in public sector NBFCs and as a first step it proposed to restructure PFC and REC.

The boards of both companies subsequently approved a merger plan, stating that the new entity will remain a government company, clearing the air over ownership.

Mumbai: The success of the Reserve Bank of India‘s June measures to attract foreign currency inflows will hinge on whether the country can strengthen its balance of payments (BoP) over the next three to five years, economists said, warning that these steps only defer external sector risks.

The central bank earlier this month offered a concessional swap facility for external commercial borrowings (ECBs) and foreign currency non-resident bank (FCNR[B]) deposits to attract dollar inflows amid a sharp depreciation of the rupee, effectively buying policymakers time at a cost largely borne by the RBI.

The inflows, however, are temporary. As ECBs mature and FCNR(B) deposits come due over the next three to five years, those dollars will need to be repaid, reversing the inflows. By then, India will require either a stronger BoP or a larger stock of foreign exchange reserves to absorb the outflows without putting pressure on the rupee.

Market participants estimate the measures could bring in between $40 billion and $70 billion, providing a window to improve the country’s external position before these liabilities fall due. As things stands, forex reserves of $672 billion are currently adequate to provide import cover for about 11 months, RBI governor Sanjay Malhotra has often said in media interaction.

“India’s foreign exchange reserves need to rise organically, not just on account of banking inflows, to the extent that the RBI can retire this debt three to five years later. BoP is a larger concern because we are in a structurally different world where financial conditions are tight and capital inflows are scarce,” said Dhiraj Nim, economist and FX strategist at ANZ Bank.

“No one knows what the situation will be three years from now. But if it doesn’t change, we will get back to where we were a month ago,” Nim said. India’s BoP has grown volatile in recent years due to swings in capital flows. After recording a surplus in FY23- 24, the country posted deficits in FY25 and FY26, reflecting weak financial inflows, particularly on the capital account.
Concerns over sustaining inflows are also linked to structural factors. India has yet to establish a leading position in emerging sectors such as artificial intelligence, while the outlook for software exports—a key source of foreign exchange earnings—is becoming more uncertain, market participants said. A further risk stems from currency movements. A weaker rupee would raise the cost of servicing these liabilities, as the dollars mobilised under ECB and FCNR(B) routes become more expensive to repay in rupee terms, increasing the effective cost for the central bank.

Unlike the 2013 episode, when similar measures were introduced during a balance of payments crisis, the current steps are pre-emptive. “If the rupee weakens further over the next few years, the RBI will end up bearing a higher cost. The measures this time versus 2013 are pre-emptive rather than crisisdriven,” said Abhishek Upadhyay, senior economist, fixed income strategy, at ICICI Securities Primary Dealership.