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Commodities · Geopolitics · Gold · Interest Rates
Gold spot prices recorded an approximate 8% weekly decline, marking their steepest drop since early 2020, as the U.S.-Israel war on Iran escalated inflation expectations and diminished prospects for near-term interest rate cuts from major central banks, including the Federal Reserve.
The yellow metal tumbled on Thursday after several central banks flagged caution over the inflationary effects of the Iran war, fueling expectations for no immediate rate cuts. Bullion found some relief from a dollar drop, which was headed for its first weekly loss in three, outpaced by other major currencies after central banks flagged rate hike plans due to rising energy prices.
Oil prices surged to near four-year highs, fueled by Middle Eastern energy infrastructure strikes. The Reserve Bank of Australia hiked interest rates, while the Federal Reserve, European Central Bank, Swiss National Bank, and Bank of Japan left rates steady, warning of few changes.
ING analysts stated growing concerns over global economic fallout and oil price spikes are weighing on risk appetite and reducing the likelihood of a near-term U.S. rate cut. Despite this sharp pullback, Yardeni Research reaffirmed a bullish long-term outlook for gold, projecting $6,000 by year-end and $10,000 by 2029, anchored in its "Roaring 2020s" scenario.
Yardeni expects central banks to continue adding to reserves, strong Chinese investor demand, and persistent geopolitical tensions to underpin structural demand.
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