Why is the price of gold trending down?
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- Gold has dropped from a January 28 high of $5,303 per troy ounce to $4,235 on Friday, falling despite the US-Israel war against Iran that began in late February — the opposite of gold's typical safe-haven behavior in a crisis.
- Iran has been blocking traffic through the Strait of Hormuz since the war's start in retaliation, impeding a major artery for oil and gas shipments and pushing energy prices higher — a key driver of US inflation climbing to 4.2%, its highest in three years.
- The CME FedWatch tool now puts the likelihood of a Federal Reserve rate hike by December at more than 50%, reversing expectations of cuts that President Trump had lobbied for, as a steady US job market dashes hopes of near-term rate relief.
- Collin Plume, CEO of Noble Gold Investments, told Al Jazeera that the Iran conflict has strengthened the US dollar, and since gold is priced in dollars, "when the dollar strengthens, gold feels the pressure; when the dollar weakens, gold tends to climb."
- Justin Cardwell, head options analyst at OptionSpreaders.com, explained that gold is a "non-yielding" asset that "doesn't yield value till prices go up," so high interest rates put it "in direct competition with the dollar."
- On Friday, gold closed slightly higher on news of a potential US-Iran deal, but Cardwell said any inflation relief would still take several months and "there are so many other factors that will keep a lid on what gold prices can do."
Why it matters: With US inflation at a three-year high and rate-hike odds now topping 50%, gold faces a rare scenario where a major war no longer lifts its price — bad news for investors who bought it as a war hedge, and a signal that Fed policy is now dominating geopolitics as the driver of precious-metals markets.
