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Gold · Inflation · Interest Rates · Middle East
Gold prices are experiencing significant downward pressure as global markets rapidly adjust interest rate expectations, primarily driven by escalating concerns that the Middle East conflict, particularly involving Iran, could reignite global inflation through surging energy prices.
eToro market analyst Josh Gilbert highlights a dramatic shift from markets fully pricing in two US Federal Reserve rate cuts just last Friday, to now seeing only an 80 percent chance of a single cut this year. This repricing strengthens the US dollar and pushes bond yields higher, creating a "double headwind" for gold, a non-income-generating asset priced in dollars.
Gilbert draws parallels to 2022, when the Russia-Ukraine conflict led to similar inflationary spikes and aggressive Fed tightening, causing gold prices to decline. Furthermore, the physical gold market faces disruptions, with the UAE, a crucial trade hub, experiencing shipment challenges due to airspace closures and security risks for land transport.
While this supply bottleneck isn't immediately impacting spot prices, it introduces a layer of tightness that could offer support once the current macroeconomic selling pressure eventually subsides.
