Gold And Silver Plunge As Iran War Damps Rate-Cut Hopes

Gold sank for a seventh session as the escalating war in the Middle East drove oil prices higher and reduced prospects for a US interest-rate cut in the near term. Silver slumped more than 10%.

Gold slid as much as 6.5%, on track for its longest losing streak since 2023. Roughly three weeks into the war, soaring crude and gas prices are raising inflationary risks, which make rate cuts by the Federal Reserve and other central banks less likely. That’s a headwind for the metal, which doesn’t pay interest.

Oil extended gains on Thursday following attacks on some of the Middle East’s most important energy facilities. A day earlier, the Fed held interest rates steady and projected just one cut this year, with Chairman Jerome Powell saying a reduction would be dependent on slower inflation.

“It’s an interest rate and oil story here. People are worried we will get slower growth and inflation, with the Fed and others tightening policy,” said Bart Melek, global head of commodity strategy at TD Securities.

Global stocks and bonds also sold off amid the escalating Iran war and surging energy prices. That forced some investors to sell their positions in precious metals to raise cash, according to Melek.

Gold’s performance since the war broke out mirrors its decline through the summer of 2022, when Russia’s invasion of Ukraine caused an energy price shock that rippled through global markets. While volatility in precious metals has calmed somewhat compared with the wild price swings in January, fluctuations have scared off some investors seeking a haven.

Gold-backed exchange traded funds, a popular way to hold the metal for Western retail and institutional investors, have seen persistent outflows in recent weeks, weighing on prices. ETF demand for gold tends to be particularly sensitive to interest-rate changes.

“It’s not a safe haven anymore, it’s a speculative asset,” Patrick Armstrong, chief investment officer of Plurimi Wealth LLP, said on Bloomberg Television.

Bullion is still up almost 6% so far this year, though upward momentum has stalled in recent weeks.

Spot gold was down 4.3% to $4,610.91 an ounce as of 10:20 a.m. in New York. Silver slipped 7.8% to $69.52. The Bloomberg Dollar Spot Index fell 0.3%.

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