Gold Heads for Worst Week in Six Years, War Suppresses Chances of a Cut
Gold prices are headed for their biggest weekly decline in six years, as war in the Middle East fuels an energy boom and dampens expectations of an interest rate cut. Bullion traded within a limited range around US$4,660 per ounce on Friday, but is already down more than 7% for the week—its weakest since March 2020.
The sharp rise in crude oil, natural gas, and fuel prices due to the conflict has renewed inflation concerns, reducing the likelihood of central banks cutting interest rates anytime soon. This is weighing on non-yielding gold, especially as Treasury yields and the US dollar have strengthened.
Although often viewed as a geopolitical hedge, gold has fallen every week since the US and Israel attacked Iran last month. The decline was exacerbated by selling to cover losses in other assets, as well as outflows from gold-backed ETFs, which have wiped out all gains in holdings since the start of the year.
The Federal Reserve held interest rates on hold this week, as expected. Fed Chairman Jerome Powell emphasized that further easing could be resumed if progress is made in lowering inflation, reinforcing the narrative that interest rates could remain high for longer as price pressures rebound through energy channels.
Over the past three weeks, global gold ETFs are estimated to have seen consecutive outflows, with holdings dropping by more than 60 tons, according to Bloomberg data. Technically, gold ended a seven-day losing streak on Thursday—its longest since October 2023—and the 14-day RSI indicator fell below 35, approaching an area considered by some market participants to be "oversold."
Despite the sharp correction, gold is still up around 8% year-to-date after briefly hitting a record near US$5,600 in late January, supported by investor interest, central bank buying, and concerns about the Fed's independence. Some analysts believe that if the war drags on, market focus could shift from inflation to recession risks—a situation that could potentially restore gold's safe-haven role.
Source: Newsmaker.id
