Gold Prices Plunge as Geopolitical Tensions Rise
Gold has recorded its sharpest weekly decline in over four decades, dropping 11% in just one week — the biggest fall since 1983. On Friday, prices slid another 3.5%, settling at around $4,488 per ounce.
This steep decline comes despite ongoing geopolitical instability in the Middle East. Historically seen as a safe-haven asset, gold is now facing pressure as markets react differently to the escalating conflict involving Iran.
Since late February, when the United States and Israel initiated attacks on Iran, gold prices have fallen more than 15%. This downturn has erased a significant portion of the rally that pushed gold to nearly $5,500 in January.
Interestingly, this recent drop has raised doubts about gold’s traditional role as a reliable hedge during times of crisis.
Interest Rate Expectations and Bitcoin Shift Market Dynamics
Another major factor weighing on gold is the growing expectation that the US Federal Reserve will not cut interest rates this year. Federal Reserve Chair Jerome Powell recently indicated that inflation could rise in the short term due to increasing energy prices.
Higher interest rates tend to make yield-bearing assets like bonds more attractive compared to gold, which does not offer returns. This shift in investor preference has added further downward pressure on gold prices.
Meanwhile, geopolitical tensions are also disrupting global oil supply, particularly through the Strait of Hormuz, increasing fears of a prolonged energy crisis. US President Donald Trump has hinted at possibly scaling back military involvement, although troop deployments in the region have increased.
In contrast to gold, Bitcoin has shown resilience. While gold has surged 48.5% over the past year, Bitcoin has declined by 16.5% during the same period. However, since the Iran conflict escalated, Bitcoin has rebounded strongly, rising over 11% to around $70,535.
