Gold Price "Eight Consecutive Declines"! Safe-Haven Attribute, Why Suddenly "Failing"?

Why are inflation expectations outweighing geopolitical risks in dominating gold prices?

This Friday, spot gold prices fell below $4,500 per ounce during trading, marking the eighth consecutive day of decline. Despite ongoing tensions in the Middle East, gold, traditionally a safe-haven asset, has performed “unusually” weakly. What are the reasons behind this?

CCTV reporter Shusha Sha: This week, the prices of precious metals like gold and silver continued to decline in the international markets. The gold futures for April delivery on the New York Mercantile Exchange dropped from $5,061.70 per ounce last Friday to below $4,600 this Friday, a weekly decline of 9.62%, the largest weekly drop in 15 years. Meanwhile, silver futures for May delivery fell from above $80 per ounce to below $70, with a weekly decline of over 14%. Additionally, London spot gold prices fell below $4,500 per ounce during trading, with a weekly decline of over 11%, marking the eighth consecutive day of decline.

As a traditional safe-haven asset, why does gold seem to have “failed” as a hedge during this Middle East conflict?

Analysts point out that the main reason is that the market’s trading focus has shifted from “geopolitical safe-haven” to “inflation expectations and monetary policy battles.” The conflict in the Middle East has ignited the oil market, quickly fueling strong concerns about a resurgence of global inflation.

Faced with the potential risk of stagflation, major central banks around the world may need to reassess their monetary policy paths. Currently, the CME FedWatch Tool shows that the market expects less than a 10% chance of a rate cut by the Federal Reserve this year, and even a possibility of rate hikes. This increases the attractiveness of interest-bearing assets like bonds, while gold, which does not generate interest income, becomes less attractive. Meanwhile, the recent strengthening of the US dollar index has suppressed gold demand, putting downward pressure on gold prices. Data shows that since the outbreak of the conflict, international gold futures have fallen approximately 13%.

Despite the short-term sharp decline, many Wall Street institutions remain optimistic about the long-term prospects of gold. Analysts believe that ongoing central bank gold purchases, de-dollarization trends, and geopolitical uncertainties will continue to support gold prices. JPMorgan still forecasts that gold futures could reach $6,300 per ounce by the end of 2026, while Deutsche Bank maintains its long-term target price of $6,000 per ounce.

Source: CCTV Finance (ID: cctvyscj)