Gold Prices Poised for Most Significant Weekly Decline in Over Four Decades Amid Uncertainty Over Iran Conflict

Gold Prices Plummet Amid Escalating Middle East Conflict

Gold is on pace for its largest weekly loss since 1983, with prices down 2.1% as the US dollar and bond yields rally in response to a Wall Street Journal report that the Pentagon is sending three warships and thousands of additional Marines to the Middle East.

The metal, often viewed as a safe-haven asset, has declined every week since the US and Israel's attack on Iran last month. This downturn is attributed to increased bets on rate hikes, with traders now estimating a 50% chance of a rate hike by October due to concerns over global inflation. Higher interest rates negatively impact gold as it does not pay interest.

Global gold-backed exchange-traded funds (ETFs) have posted outflows, with holdings erasing all additions since the start of the year. The US Federal Reserve met midweek and opted to leave rates unchanged, with Chair Jerome Powell emphasizing that further easing would require progress in reducing inflation.

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Gold's performance mirrors a decline in 2022, when Russia's invasion of Ukraine caused an energy shock that rippled through global markets. The metal's recent pullback has resulted in a three-week streak of outflows from bullion-backed ETFs, with holdings falling over 60 tons in that period.

Despite the recent decline, gold remains about 5% higher this year, with prices reaching a record just below $5,600 an ounce in late January. Other precious metals, including silver, palladium, and platinum, are also on track for weekly losses, while the Bloomberg Dollar Spot Index has risen 0.5%.