Gold Prices Plummet Below $5,000 Amid Ongoing Middle East Conflict and Elevated Oil Prices

Gold Prices Plummet Below $5,000 an Ounce Amid Ongoing Middle East Conflict

Gold prices have fallen below $5,000 an ounce as the war in the Middle East enters its third week, with oil prices surging after attacks on critical energy infrastructure. Bullion prices dropped by up to 1% in early trading, following their second consecutive weekly decline.

The conflict has heightened concerns over inflation and interest rates, leading to a decrease in expectations of a rate cut by the US Federal Reserve and other central banks. Crude oil prices surged after US attacks on Iran's main oil-export hub were followed by retaliatory attacks on energy infrastructure in various Arab states.

The uncertainty surrounding the war's duration and its impact on markets and the wider economy has made it challenging to assess the situation. The conflict is expected to last four to six weeks, according to an aide to President Donald Trump.

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The latest US consumer spending data, released on Friday, showed a decline in spending due to weaker-than-expected economic growth. US consumer sentiment also declined to a three-month low, as fears mounted about the impact on gasoline prices from the conflict.

As a result, traders now see virtually no chance of a rate cut at this week's Fed meeting. Higher borrowing costs typically weigh on precious metals, which don't pay interest. However, concerns over stagflation - a combination of slower growth and high inflation - may prompt investors to turn to gold as a better store of value over the longer term.

Spot gold fell 0.7% to $4,986.34 an ounce as of 7:26 a.m. in Singapore, while silver fell 0.7% to $80.03. Platinum and palladium also dropped. The Bloomberg Dollar Spot Index slipped 0.1% after adding more than 1% in the previous week.