Gold Price Plunges 3% as Iran Conflict Exacerbates Inflation Worries

Global Markets Update: Gold Prices Plunge Amid Ongoing Middle East Conflict

Gold prices dropped sharply, nearing a loss of this year's gains, as the war in the Middle East entered its fourth week. The conflict has raised inflationary risks and reduced prospects for near-term interest-rate cuts by the US Federal Reserve and other central banks, creating a headwind for non-yielding gold.

Gold prices plummeted as much as 3.8% to near $4,320.30 an ounce, less than $1 above where it ended last year. This represents the metal's biggest weekly drop since 1983. The decline has been driven partly by forced selling as investors seek to cover losses elsewhere in their portfolios.

In the three weeks since the war began on February 28, gold's decline has been relentless. The metal ended last year at $4,319.37 an ounce. The US President Donald Trump gave Iran a two-day deadline to reopen the Strait of Hormuz or face attacks on its power plants. Iran countered that it would close the strategic waterway and target energy, information technology, and desalination infrastructure if its power facilities come under attack.

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Technical indicators suggest that gold is oversold, with its 14-day relative-strength index falling below 30. However, the metal's short-term prospects will depend on whether Trump follows through with his threats to hit Iranian power plants. Hedge funds and other large speculators increased their net-long position for gold to the highest in seven weeks as of March 17, according to weekly US government data.

Spot gold prices plunged 3.3% to $4,343.40 an ounce at 9:00 a.m. in Singapore, while silver slipped 3.4% to $65.61. Platinum and palladium also fell. The Bloomberg Dollar Spot Index, a gauge of the US currency, rose 0.1%.