Gold prices have experienced a dramatic 13% decline since the U.S.-Iran conflict erupted on February 28, with spot gold falling to $4,557.25 per ounce as of the latest trading session. According to The Economic Times, this represents the lowest level since May 6, marking a significant retreat from previous consolidation levels. The precious metal has now lost 3.3% so far this week and extended losses for a fourth consecutive session, with U.S. gold futures for June delivery down 2.7% to $4,561.30. This sharp correction from the $4,700 level has been followed by sustained selling pressure, with technical analysis indicating potential downside toward key support levels.
The latest price decline comes amid ongoing geopolitical tensions, with U.S. President Donald Trump departing China touting business deals that gave markets little to cheer, while Beijing warned Washington about mishandling Taiwan and said its war with Iran should never have started. As per The Economic Times, these developments have created continued uncertainty in global markets and contributed to the selloff in non-yielding assets like gold and silver. The tensions have also sparked forecasts from major financial institutions, with ANZ Group projecting gold prices could rise to $6,000 per ounce by mid-2027, driven by economic slowdowns linked to conflicts in the Middle East. Recent developments show that the U.S. conditional ceasefire with Iran has held for over a month, with some tanker traffic now resuming via the Strait of Hormuz, easing short-term geopolitical risk premiums.
The weakness in precious metals has been compounded by a sharp repricing in inflation expectations that has fundamentally altered market dynamics. As per Reuters reports, US producer prices posted their biggest monthly increase in four years, while several Fed officials warned that inflation risks remain elevated. This has created a significant shift in market expectations, with traders now increasingly questioning whether the Fed may need to hike rates again within the next year rather than cut. The April CPI showed a significant increase with headline inflation jumping 0.6% over the month and 3.8% from last year, marking its highest pace in almost three years. A series of inflation reports this week showed the risk that rising energy costs could spill over to other goods and services, dimming hopes for near-term U.S. rate cuts. Traders have largely priced out U.S. interest rate cuts this year, with markets anticipating a 39% chance of a hike by December, according to CME Group's FedWatch tool.
Brent crude oil prices were up 6.6% this week, hovering above $108 a barrel, as the Iran war drags on, keeping the key Strait of Hormuz largely shut. According to The Economic Times, elevated oil prices have stoked inflation fears, boosting expectations of higher interest rates and sending U.S. Treasury yields near one-year highs. This development immediately fed into interest-rate markets, as higher energy costs typically translate into broader inflation pressures. The combination of elevated oil prices and persistent inflation concerns has created a challenging environment for precious metals, as investors increasingly question whether the Fed may need to maintain higher interest rates to combat rising energy costs. The dollar has gained more than 1% so far this week, making greenback-priced bullion expensive for holders of other currencies, adding additional pressure on gold prices.
The precious metals selloff has been broad-based, with spot silver falling 6.4% to $78.16 per ounce, platinum losing 2.7% to $1,999.60, and palladium down 0.7% at $1,427.39. As per Tim Waterer, chief market analyst at KCM Trade, "Gold is getting hit from all sides - rising oil has brought inflation back to the forefront, pushing yields higher and the dollar stronger, leaving the yellow metal as the unfortunate victim of the market's renewed rate-cut scepticism." Despite current volatility, technical analysis suggests gold's daily bar on the 2H chart shows a bullish hammer formation on retest of black ascending trendline support from early-May lows at around $4,508. However, the ANZ Group forecast reinforces that gold faces headwinds from geopolitical uncertainties and policy developments, even as long-term fundamentals remain supportive with China's PBOC continuing gold purchases for over 17 months and gold purchases in emerging markets generally picking up.
