Spot Gold and Silver Prices Plunge; Iran War Escalates Inflation Concerns

Gold prices decline for the ninth consecutive day, erasing this year’s gains, as the Middle East conflict intensifies inflation risks and fuels expectations of interest rate hikes. Silver prices plummet over 10%.

Spot gold prices once dropped 8.8%, approaching $4,100 per ounce. Since the outbreak of conflict, energy prices have surged, reducing the likelihood of rate cuts by the Federal Reserve and other central banks in the near term. This is unfavorable for non-yielding gold, which previously experienced its largest weekly decline since 1983.

Gold’s movement remains volatile, in line with overall market trends, with oil prices fluctuating near their highest close since mid-2022, and stock markets also experiencing turbulence. Over the three weeks since the conflict began on February 28, part of the decline in gold prices has been due to investors selling off assets to offset losses elsewhere in their portfolios. At the end of last year, gold closed at $4,319.37 per ounce.

“While the extent of gold’s decline isn’t unprecedented, the speed of the drop far exceeds many historical periods,” said Wayne Gordon, Investment Advisor at UBS Wealth Management.

Over the weekend, U.S. President Donald Trump issued a final ultimatum to Iran, demanding full opening of the Strait of Hormuz within 48 hours or face attacks on the country’s power facilities. Iran responded that if its power plants are attacked, it will “completely” block the Strait of Hormuz and target all energy, information technology, and seawater desalination infrastructure in the Middle East belonging to Israel and the U.S. The ultimatum was issued at 7:44 p.m. New York time on Saturday.

“Gold’s reaction to the current macroeconomic shocks has clear market precedents,” said David Wilson, Head of Commodities Strategy at BNP Paribas. “Looking back at previous three economic shock cycles—2008, 2020, and 2022—as markets reacted to the news, gold initially declined, with investors often selling assets to hold dollars.” He added that all three shocks were followed by sustained rallies.

The 14-day Relative Strength Index (RSI) for gold continues to fall below 30, with some traders viewing this level as oversold. Weekly data released by the U.S. government last Friday showed that, as of March 17, hedge funds and other large speculators increased their net long positions in gold to the highest level in seven weeks.

Spot gold prices fell 8.6%, to $4,108.64 per ounce. Silver prices dropped 9.2%, to $61.66 per ounce. Platinum and palladium prices also declined. The Bloomberg U.S. Dollar Spot Index rose 0.3%.