Gold Plummets After 4-Day Rally, Dollar & Yields Rise on Middle East War
Gold prices corrected sharply after a four-day rally, as markets assessed the impact of the Middle East war on the prospects of a stronger US dollar and potentially higher inflation. In the European session, spot gold fell 3.8% to $5,118.50 per ounce at 11:36 a.m. London time, marking a swift reversal after safe-haven interest dominated at the start of the conflict escalation.
The main pressure came from a combination of a strengthening dollar and rising US bond yields, which increased the opportunity cost of holding non-yielding assets like gold. The dollar index (DXY) hovered around 99.17 (+0.67%), while interest rate markets shifted—expectations for a Fed cut are now leaning toward September, later than previously expected.
The turmoil also swept through other precious metals. Silver also took a hit, with Reuters recording a decline of around 6.5% to $83.63/oz in Tuesday's trading, confirming that the sell-off was widespread and not limited to gold. In a risk-off phase, liquidation pressure to meet margin calls in other assets often leads market participants to unwind positions in precious metals—even as geopolitical tensions escalate.
From a fundamental perspective, the market is refocusing on the path of inflation: a war that pushes up energy prices could spill over into inflation data and keep the Fed from keeping interest rates high for longer. US manufacturing activity indicators also point to strong input price increases, reinforcing the narrative that price pressures have not fully abated—a combination that typically supports the dollar and pressures gold.
Nevertheless, geopolitical tensions remain a structural floor for gold. Some analysts believe that if the conflict drags on, gold could still potentially retest its peak area—but its path will be determined by how long the dollar remains dominant as a safe-haven and the extent of the repricing of US interest rates. With volatility already high and liquidity tending to dwindle during market panics, gold prices are expected to remain volatile in the coming sessions. (alg)
Source: Newsmaker.id
