Gold Prices Plummet Amid Iran Conflict, Wiping Out 2026 Gains

Gold Prices Plummet Amid Escalating Conflict in the Middle East

Market Update

Gold prices have fallen significantly, wiping out this year's gains, as the war in the Middle East spurs a broad selloff across markets. The metal has shed more than 20% since the war in Iran began, with spot gold plummeting 8.8% to just shy of $4,100 an ounce. This represents the metal's biggest weekly drop since 1983.

Market Dynamics

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The rapid selloff is driven by investors' need to raise cash, as the conflict sees investors ditch their relatively liquid assets. Expectations of higher interest rates and a stronger US Dollar add to headwinds, making non-yielding bullion less appealing when rates remain high. A similar dynamic was observed following the Russian invasion of Ukraine, where an initial spike in the safe-haven asset was followed by a months-long decline.

Impact on Gold Assets

Selloffs have deepened across various types of gold assets, including gold-backed exchange-traded funds (ETFs), which have seen a net outflow of around 11 tons since the start of this year. The aggregate open interest for gold futures on Comex has also plunged to the lowest level since 2018, showing the washout of speculative positions.

Market Precedent

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Gold's reaction to the current macro-economic shock has a clear market precedent. In previous economic-shock cycles, gold initially fell as markets reacted to news flow, with investors typically selling assets to hold the US Dollar. This was observed in 2008, 2020, and 2022, with all three periods followed by a sustained rally.

Current Market

Spot gold fell 4.7% to $4,281.88 an ounce at 9:36 a.m. in London, while silver slid 5.6% to $64.13. The Bloomberg Dollar Spot Index, a gauge of the US Currency, rose 0.4%.