Gold prices are heading for their sharpest weekly decline in 6 years, as conflicts in the Middle East push energy prices up sharply and weaken interest rate cut expectations.
Precious metals traded around 4,640 USD/ounce on Friday, down nearly 8% in the week, the deepest drop since March 2020. Crude oil, gas and fuel prices rose sharply due to war events that raised concerns about inflation, making it difficult for central banks to ease monetary policy. This is a disadvantage for gold, which does not yield yields.
Although considered a safe haven asset, gold has fallen continuously since the US and Israel attacked Iran last month. The decline occurred in the context of rising US bond yields and the USD, investors selling gold to offset losses in other markets, and gold ETF funds recording capital outflows.
Mr. Robert Gottlieb, former precious metal trader at JPMorgan and currently an independent analyst, warned investors not to rush to "bottom-fish" in this period. According to him, the level of volatility is still too high and the market may face further selling pressure until prices stabilize again.
During the week, the US Federal Reserve (Fed) held a policy meeting and decided to keep interest rates unchanged as forecast. Chairman Jerome Powell emphasized that the resumption of the easing cycle will only take place when there is a clear signal that inflation is cooling down.
The current developments of gold evoke the scenario of 2022, when the Russia-Ukraine conflict caused a global energy shock. At that time, gold prices experienced a 7-month consecutive decline, the longest in history, before hitting a bottom in October.
Despite a sharp correction, gold has still increased by about 8% since the beginning of the year. The price once peaked at nearly 5,600 USD/ounce at the end of January, supported by investment demand, buying power from central banks and concerns about the independence of the Fed.
In this morning's trading session, spot gold prices almost went sideways at 4,684 USD/ounce, after ending a 7-session consecutive decline on Thursday, the longest decline since October 2023. Silver fell to nearly 72 USD/ounce, losing about 10% in the week. Palladium and platinum are also heading towards a week of price decline.
