NEW YORK: Gold prices fell sharply on Monday, extending a historic selloff as the conflict in the Middle East kept energy markets volatile and reinforced inflation concerns that have unsettled precious metals. Spot gold was down 2.2% at $4,388.22 an ounce by 1230 GMT after tumbling as much as 8% earlier in the session to a four month low. U.S. gold futures for April delivery were down 4.2% at $4,382.30, leaving bullion in a ninth straight session of losses.
The latest drop left gold about 17% below its level at the start of the conflict on Feb. 28 and roughly 22% under the record $5,594.82 reached on Jan. 29. The move followed bullion’s steepest weekly slide in 43 years, underscoring how the metal’s traditional safe haven role has been overtaken by broader deleveraging and a shift in interest rate expectations. A stronger U.S. dollar added pressure as traders cut exposure across commodity and equity markets amid wide swings in global prices.
Prices later trimmed part of the early loss after President Donald Trump said the United States would delay planned strikes on Iranian power plants and energy infrastructure, easing some of the immediate pressure in oil and currency markets. Even so, bullion remained lower on the day as the wider conflict continued to disrupt financial markets. Brent crude fell more than 12% after the announcement, but the broader energy shock had already intensified concern that inflation could stay above central bank targets for longer than previously expected.
Central banks keep rates steady
That backdrop hardened last week when the Federal Reserve left its benchmark rate unchanged at 3.5% to 3.75% and said the implications of developments in the Middle East for the U.S. economy remained uncertain. The European Central Bank also kept rates unchanged and said the conflict had made the outlook significantly more uncertain, creating upside risks for inflation and downside risks for growth. The Bank of England held Bank Rate at 3.75%, citing the conflict’s effect on energy supply, prices and the inflation outlook.
Those decisions reinforced the mechanism behind the gold retreat. Rising oil and gas prices have lifted concern that inflation could prove more persistent, reducing the case for near term rate cuts and weighing on non yielding assets such as bullion. The ECB said higher energy prices would have a material effect on near term inflation, while British policymakers said they were closely monitoring the conflict’s impact on global energy supply and domestic prices. That mix left gold exposed despite its long standing role as a store of value.
Other metals show mixed moves
Other precious metals were mixed as investors reassessed inflation, liquidity and growth risks. Spot silver rose 0.6% to $68.16 an ounce after earlier touching its lowest level since mid December. Platinum fell 1.3% to $1,897.17 after hitting a three month low, while palladium advanced 3.6% to $1,454.64. The divergence showed that Monday’s trading was driven not only by haven demand but also by margin calls, dollar strength and shifting expectations for policy rates as the energy shock rippled through global markets.
Gold remains up about 46% from a year earlier, but Monday’s action showed how quickly that longer term rally has been interrupted by conflict driven inflation fears and tighter financial conditions. With bullion now well below its January peak and much of its gain for the year erased, the focus has shifted from geopolitical hedging to the path of energy prices, interest rates and market liquidity. For now, the confirmed picture is a severe but volatile correction in gold as traders absorb the economic fallout from the Middle East conflict. – By Content Syndication Services.