Gold Prices Headed for Biggest Weekly Loss Since 1983

Gold prices are on track to post their largest weekly decline since 1983, as the ongoing war in the Middle East boosts energy prices and reduces expectations for interest-rate cuts. The metal's decline has deepened following reports that the US is preparing to potentially deploy ground forces into Iran.

Market Outlook

Traders have increased their bets on a rate hike to 50% by October, amid concerns that a protracted conflict could stoke inflation. Higher interest rates hurt gold as it doesn't pay interest. The US dollar and bond yields have rallied, contributing to the decline in gold prices.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

Market Analysis

According to Rhona O'Connell, an analyst at StoneX Financial, gold's pullback reflects a combination of profit-taking and liquidation amid concerns about less monetary easing. Prices above $5,200 had attracted a lot of buyers, leaving the market vulnerable to correction. Technical signals, particularly moving averages, have added to the downward pressure.

Market Trends

Forced selling tied to the equity rout may also have contributed to gold's decline, while slower central bank buying and outflows from exchange-traded funds have further weighed on sentiment. Bullion-backed ETFs are set for a third week of outflows, with holdings falling more than 60 tons in that period.

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

Current Prices

Gold fell 3.1% to $4,508.96 an ounce as of 3:03 p.m. in New York, on course for an eight-day losing run, the longest since October 2023. Silver fell 6.3% to $68.20 an ounce, down by more than 15% this week.