Gold dropped below the $5,000-an-ounce level for the first time in a month amid concerns that conflict-induced inflation could derail the Federal Reserve’s rate-cut path.
On Wednesday, spot gold went down by as much as 3% to $4,836 per oz., its lowest since Feb. 17. U.S. gold futures suffered similar losses. Silver, too, declined by about 3% to below $80 an ounce.
Bullion has traded within a narrow range in recent sessions, as investors weighed the geopolitical risks against the inflationary pressures brought by the Middle East conflict. The yellow metal tends to thrive during times of economic turmoil, but high prices could force central banks to keep interest rates elevated, taking the appeal out of non-yielding assets.
As the war drags on, inflationary concerns have gained the upper hand because supply-chain disruptions in the region continue to send energy prices higher. Since the strike on Iran late last month, gold has now fallen by over 6% after an initial surge above $5,400 — about $200 off its record high set in January.
Fed decision
The Federal Reserve held interest rates steady on Wednesday and signalled higher inflation, steady unemployment and just one rate cut this year as policymakers assessed risks tied to the U.S. and Israeli war with Iran.
Updated projections from the central bank showed its benchmark overnight rate would fall by only a quarter of a percentage point by year-end to 2.7%, with no indication of timing. The outlook was unchanged from earlier forecasts.
Long-term bulls
Despite its recent weakness, gold is still up 15% on the year, extending its blistering rally from 2025.
Analysts, including those from major banks, remain bullish on the metal over the coming months, as inflation (or even stagflation) could eventually steer investors towards gold for its role as a store of value.
Earlier in the year, JPMorgan forecast that gold could reach $6,300 by the end of 2026, while BNP Paribas projected prices to hit at least $6,000. Last week, UBS also set a target of $6,200 per oz., citing the metal’s performance post geopolitical conflicts throughout history.
