Gold prices have experienced a 27% decline over the course of the West Asia conflict, with silver registering an even more severe 52% decline as the region's ongoing tensions continue to impact precious metals demand. According to The Financial Express, this represents a dramatic reversal from the dramatic gains both commodities had achieved in 2025 and early 2026, with the conflict wiping out previous gains and more. Gold prices had previously touched their lowest level since June 30 earlier in the session, with spot gold up 1% at $4,011.29 per ounce by 2:20 p.m. EDT but still reflecting significant downward pressure. U.S. gold futures for August delivery settled 0.7% higher at $4,018.80, while London Bullion Market Association (LBMA) gold spot prices had previously slipped below $4,000 per ounce from $4,111. At MCX (India's largest commodity derivatives exchange), the sell-off has been milder due to the rupee depreciating more than 1% against the US dollar, as noted by Renisha Chainani, head of research at Augmont Gold. On the Multi Commodity Exchange (MCX), gold futures for August delivery declined ₹2,572, or nearly 2 per cent, closing at ₹1.4 lakh per 10 grams, while silver for the September contract slumped ₹6,261, or 2.8%, to ₹2.16 lakh per kilogram. In global markets, Comex gold futures slipped $95, or 2.3%, to close at $4,018.8 per ounce during the past week, while silver plunged nearly $4, or 6.4%, to $56.32 per ounce in New York. Gold and silver recovered on Friday but still ended the week in the red territory as crude oil prices surged more than 14% on fears of supply disruptions, with Brent crude oil prices up around 16% for the week following the attacks, as noted by NDTV Profit.
The primary driver behind gold's decline has been soaring energy costs that are reducing available funds for precious metals purchases. As reported by The Financial Express, energy is an essential commodity while gold is not, meaning when energy prices rise, consumers must spend more on energy and have less available to invest in gold. Over the last five months, spending on energy imports has increased significantly, with the government implementing higher taxes on gold imports to discourage spending. Gold imports dramatically declined in April, before recovering in the last two months, but as of today, gold imports are half of what they were at the start of the year. The combination of increased energy costs and higher taxes has substantially reduced gold imports, creating a direct correlation between energy price inflation and precious metals demand destruction. Rising Treasury yields further dented bullion's appeal, adding to the pressure on precious metals demand. Praveen Singh, Head of Commodities at Mirae Asset ShareKhan, said hawkish comments from Federal Reserve Chair Kevin Warsh's have offset the impact of softer US inflation data, reinforcing expectations of tighter monetary policy, according to NDTV Profit.
The softer US inflation data has all but ruled out a July Fed rate hike, with markets now seeing just a 15% chance of a rate hike from the Fed on July 31st, compared to a 40% chance before the CPI reading. As reported by XTB, this represents the biggest softening in US inflation for six years and drastically reduces the chance of a rate cut at this month's FOMC meeting. Following the inflation data, traders now see about a 58% probability of a US Federal Reserve rate hike in September, compared with 76% before the CPI report. Following the inflation data, traders now see about a 58% probability of a US Federal Reserve rate hike in September, compared with 76% before the CPI report. Hawkish comments from Federal Reserve Chair Kevin Warsh have offset the impact of softer US inflation data, reinforcing expectations of tighter monetary policy, according to Praveen Singh, Head of Commodities at Mirae Asset ShareKhan. On Thursday, Fed Vice Chair Philip Jefferson suggested he would be open to raising rates if there was no near-term improvement in inflation, according to The Economic Times. Recent data have decreased the probability of a rate hike at the next FOMC meeting, but global interest rates continue to climb and the recent increase in oil prices could drive the Federal Reserve to take a more hawkish stance on U.S. interest rate policy, said Chris Gaffney, president of world markets at EverBank. Markets continue to price in an around 80% chance of a December rate hike, according to the CME FedWatch Tool.
Brent crude oil prices were up around 16% for the week following the attacks, with U.S. gold futures for August delivery settling 0.7% higher at $4,018.80 as escalating tensions drove energy prices higher. The US military on Sunday carried out fresh airstrikes against Iran following attacks on American-linked installations in Jordan, further escalating tensions in an already volatile West Asia, as reported by The Hindu BusinessLine. The U.S. escalated its renewed bombing campaign on Iran, hitting bridges and an airport, while Tehran responded with strikes on U.S. bases across the Middle East. Tehran reportedly asked the Houthi movement to remain prepared to shut the Red Sea export route, adding to supply concerns beyond the Strait of Hormuz. Trump also said countries benefiting from US protection of commercial shipping through the Strait of Hormuz would be expected to compensate Washington for the operation. Meanwhile, reports said Iran intensified its military response by launching drones targeting US assets in Kuwait and firing cruise missiles at what it described as a hostile vessel. Tehran also said its agreement with Washington had entered a crisis phase and that it would no longer honour the deal as long as the US continued to violate its commitments.
Gold has fallen about 25% since the U.S.-backed war with Iran began in late February, pressured by expectations that war-driven inflation could keep interest rates higher for longer, as noted by The Economic Times. While gold is seen as a hedge against inflation, higher rates typically weigh on the non-yielding metal. The US dollar rose for a second straight session, making bullion more expensive for overseas buyers, according to Chris Gaffney, president of world markets at EverBank. Gold extended its corrective phase last week as a stronger US dollar, firm crude oil prices, and expectations of prolonged higher interest rates continued to weigh on bullion, said Jateen Trivedi, VP Research Analyst at LKP Securities. Every rebound in gold attracted fresh selling pressure, suggesting traders preferred booking gains rather than building fresh long positions. The rupee's mild correction offered little support as the stronger dollar continued to dominate sentiment. Gold's share in private portfolios remains low, and recent geopolitical developments, including Iran and broader tensions, may accelerate diversification beyond central banks to private investors, said Goldman Sachs in a note. Spot silver rose 1% to $56.06, platinum dropped 1.4% to $1,595.64, and palladium was steady at $1,249.63, with all three metals headed for weekly losses. Weakness in the greenback makes dollar-denominated gold and silver relatively cheaper for buyers using other currencies, potentially improving international demand. Investors will closely watch a busy calendar of key numbers, including US weekly jobless claims and flash PMI, along with monetary policy decisions and key economic indicators from Europe and China, said Pranav Mer, Senior Vice President at JM Financial Services Ltd. Any fresh friction between the US and China could revive the demand for bullion, while investors will also monitor the Eurozone, UK PMI data, and developments in Beijing for the next course of direction in precious metals.
