Gold prices are on course for their biggest weekly loss since 1983, plummeting over 10% as the conflict in the Middle East boosts energy prices and reduces expectations for interest-rate cuts. The metal, widely viewed as a haven, has dropped every week since the US and Israel attacked Iran last month. According to the International Monetary Fund, the ongoing conflict could lead to higher inflation, which would negatively impact gold prices.
Impact on Gold Prices
The retreat in gold prices has come as Treasury yields and the US dollar gained ground, with investors selling bullion to cover losses elsewhere. Gold-backed exchange-traded funds have also posted outflows, with global holdings erasing all their additions since the start of the year. As Robert Gottlieb, a former precious-metals trader at JPMorgan Chase & Co., noted, “Do not buy the dip — there’s way too much volatility.” Until the volatility starts to decrease and prices start to consolidate, there may be more selling, he said.
Factors Affecting Gold Prices
Several factors are contributing to the decline in gold prices, including:
- Higher energy prices due to the Middle East conflict
- Reduced expectations for interest-rate cuts
- Increased volatility in the market
- Outflows from gold-backed exchange-traded funds
Despite the recent pullback, gold remains about 5% higher this year. Prices touched a record just below $5,600 an ounce in late January, supported by a wave of investor enthusiasm, central-bank buying, and concerns over threats to the Fed’s independence posed by President Donald Trump. For more information on gold prices and their impact on the economy, visit the World Gold Council website.
