Iran War Plunges Gold 20%, Wiping Out Gains

The conflict in the Middle East, specifically the war in Iran, triggered a broad selloff across markets, with silver also tumbling over 10%. This marks gold's ninth consecutive day of decline and its biggest weekly drop since 1983, according to Bloomberg.

Johan Jooste, CEO of Pangaea Wealth AG, attributes part of the rapid selloff to gold's liquidity issue and investors' need to raise cash. Expectations of higher interest rates and a stronger dollar, fueled by surging energy prices from the conflict, further diminished the appeal of non-yielding bullion.

David Wilson, director of commodities strategy at BNP Paribas SA, notes that gold's reaction mirrors previous economic shock cycles (2008, 2020, 2022), where an initial fall due to a dash for the US dollar was followed by a sustained rally. Open interest for gold futures on Comex is at its lowest level since 2018, and gold-backed exchange-traded funds have seen net outflows of around 11 tons this year.

Spot gold fell 4.7% to $4,281.88 an ounce in London, while silver slid 5.6% to $64.13. Platinum and palladium also declined.

US President Donald Trump issued a 48-hour ultimatum to Iran regarding the Strait of Hormuz, threatening strikes on power plants, to which Iran responded with threats to close the waterway and target infrastructure.