TLDR
- Gold is on track for its first weekly loss in over a month, down about 3% this week
- A stronger US dollar, up 1.5% this week, is weighing on gold prices
- The US-Israel war with Iran has pushed oil prices higher and reduced expectations for Fed rate cuts
- Traders now price in just 35 basis points of Fed cuts by year-end, down from 60 a week ago
- Some investors are selling gold for cash to cover losses in other markets
Gold has had a strong year, but this week has been rough. The precious metal is heading for its first weekly drop since late January, even as a war in the Middle East continues to escalate.
Spot gold was trading around $5,089 an ounce on Friday morning in London, up 0.2% on the day but still down about 3% for the week. That puts it on track to snap a four-week winning streak.
The drop comes despite gold’s reputation as a safe haven during times of conflict and uncertainty. Analysts say the sell-off is being driven by a combination of forces.
The US dollar has surged this week, rising 1.5% — its biggest weekly gain since October 2024. A stronger dollar makes gold more expensive for buyers using other currencies, which tends to push prices down.
US Treasury yields have also climbed for four straight days, hitting their highest level in several weeks. Higher yields raise the cost of holding gold, which pays no interest.
Iran War Raises Inflation Fears, Pushes Back Rate Cut Bets
The ongoing US-Israel war with Iran has sent oil prices sharply higher. Crude is on pace for its biggest weekly jump since 2022. The Strait of Hormuz, a key shipping lane for global oil, is effectively closed.
Iran has also struck energy infrastructure in several countries. US President Donald Trump said he expects to be involved in choosing Iran’s next leader, while his team is looking at ways to tackle rising fuel costs.
Higher oil prices are raising inflation fears. That has pushed traders to scale back expectations for Federal Reserve interest rate cuts. The CME FedWatch tool shows a 69% chance the Fed holds rates at its June meeting, up from 43% just a week ago.
Rate cuts tend to support gold. Fewer expected cuts are a headwind.
Investors Selling Gold to Raise Cash
Adrian Ash, a researcher at BullionVault, said the sell-off reflects crisis behavior. “What we’re seeing right now is classic crisis trading: investors cutting risk, selling whatever they can for cash and covering margin calls elsewhere,” he said.
He added that gold had already rallied strongly this year, making it one of the few assets traders could sell at a profit.
Gold is still up nearly 20% year-to-date. A broad stock market sell-off this week has also pushed some investors to use gold as a source of liquidity.
Silver rose 1.1% on Friday to $83.08 an ounce. Platinum and palladium also advanced.
The Israeli military said Friday it is moving to the “next phase” of its Iran campaign. Defense Secretary Pete Hegseth said US firepower in the region is “about to surge dramatically.”
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