Gold declined for a second consecutive week as rising oil prices—driven by escalating Middle East tensions—have reinforced concerns about persistent cost-push inflation globally. As a result, expectations for interest rate cuts across major central banks have diminished. Given that gold is a non-yielding asset, higher interest rate environments reduce its relative attractiveness, placing downward pressure on prices.
Gold declined for a second consecutive week as rising oil prices—driven by escalating Middle East tensions—have reinforced concerns about persistent cost-push inflation globally. As a result, expectations for interest rate cuts across major central banks have diminished.
Given that gold is a non-yielding asset, higher interest rate environments reduce its relative attractiveness, placing downward pressure on prices.
Geopolitical Developments
There are currently no signs of an imminent resolution to the Middle East conflict. The Iran–Israel war has entered its 17th day, with escalating attacks and broader regional involvement.
Recent developments include:
Israeli strikes targeting Tehran
Drone attacks near Dubai International Airport disrupting operations temporarily
Attacks on Fujairah port in the UAE
Missile strikes in Abu Dhabi
Interceptions of drones across Saudi Arabia, Bahrain, Kuwait, and Qatar
On the international stage, conflicting narratives persist. While Donald Trump claimed Iran is engaging in disinformation campaigns using AI and asserted that Iranian drone facilities have been destroyed, Iran’s Foreign Minister denied any ceasefire negotiations and emphasized continued defense efforts.
Despite both sides publicly rejecting ceasefire discussions, reports suggest indirect communication between U.S. and Iranian officials via secure channels.
Gold’s upside potential depends heavily on whether elevated oil prices evolve into a stagflationary shock in the U.S. or global economy. This would likely require a prolonged and attritional conflict. However, with estimates suggesting a 4–6 week duration, the oil price surge may prove temporary—reducing rate-cut expectations and weighing on gold.
Central Bank Meetings
In the upcoming week, central banks including the Federal Reserve, Bank of England, ECB, SNB, and RBA will hold rate decision meetings. A broadly cautious stance is expected.
Gold declined 1.4% this week and failed to benefit from geopolitical risks, suggesting unfavorable near-term conditions.
The Federal Reserve’s FOMC meeting is expected to result in rates remaining at 3.75%. Given uncertainty surrounding the war, a cautious and potentially hawkish tone from Chair Powell is likely, which would strengthen the U.S. dollar and further pressure gold prices.