- Spot gold prices plummeted to a two-month low during Thursday's trading as geopolitical tensions escalated, boosting the dollar and crude oil prices. Concerns about inflation recovery and the Federal Reserve's prolonged high interest rates have significantly intensified.
- The U.S. military launched a new round of strikes on Iranian military facilities, followed by retaliatory attacks by Iran on U.S. air bases, causing international oil prices to surge by more than 3%, further reversing the flow of safe-haven funds in the market.
- The dollar index rose to a one-week high, directly suppressing commodities priced in dollars, while market focus is shifting to the upcoming U.S. Personal Consumption Expenditures Price Index to gauge monetary policy direction.
Geopolitical Deterioration Triggers Asset Price Linkage
According to the latest market data, London spot gold fell 1.8% to $4,375.78 per ounce, the lowest level since March 26. Meanwhile, gold futures for June delivery on the New York Mercantile Exchange also declined by 1.6% to $4,373.90 per ounce. The main trigger for this gold price correction is the renewed escalation of the U.S.-Iran military conflict. U.S. officials confirmed that the U.S. military attacked Iranian military facilities near the Strait of Hormuz that posed a threat to merchant ships. Subsequently, the Iranian Revolutionary Guard announced retaliatory strikes on U.S. air bases. The intense geopolitical turmoil did not, as in normal times, spur safe-haven buying of gold but instead triggered a more complex macroeconomic chain reaction by driving up energy prices, forcing bullish funds to close positions and exit.
Dollar Strength and Commodity Price Pressure
As the U.S.-Iran conflict escalated, the dollar index rose to a one-week high driven by safe-haven funds. Since global gold is primarily priced in dollars, the continued strength of the dollar increases the actual cost of purchasing gold for investors holding other currencies, thereby directly squeezing gold prices on a physical level. Market analysts point out that the repeated setbacks in peace agreement negotiations in the Middle East are transforming geopolitical uncertainty into systemic support for the dollar. The strong performance of the foreign exchange market has weakened the appeal of precious metals, and if the dollar index remains high with the support of international capital flows, gold prices will continue to face significant downward pressure in the short term.
Monetary Policy Expectations Reconstructed by Inflation Concerns
Oil prices surged by more than 3% after the conflict erupted, directly intensifying market expectations of a possible resurgence in global inflation. Although gold is traditionally seen as a hedge against inflation, the inflationary pressure brought by rising oil prices often forces central banks to implement more tightening monetary policies. Federal Reserve Governor Cook emphasized in a public statement on Wednesday that maintaining short-term interest rates is the appropriate choice in the current context of rising prices due to tariff barriers, geopolitical conflicts, and a surge in AI-related investments. However, she also warned that if core inflation indicators show signs of rebounding, the Federal Reserve is ready to raise interest rates at any time. This policy expectation of high interest rates possibly being maintained for a longer period significantly raises the opportunity cost of holding non-interest-bearing assets like gold, offsetting its inherent anti-inflation properties.
Overall Valuation Adjustment in the Precious Metals Sector
Dragged down by the sharp decline in gold prices, the global precious metals market as a whole has seen a significant valuation adjustment. Spot silver prices fell 2.6% to $72.70 per ounce; spot platinum prices dropped 1.7% to $1,884.83 per ounce, both hitting their lowest points in nearly a month. Additionally, spot palladium prices also fell 2% to $1,362.70 per ounce. The U.S. Personal Consumption Expenditures (PCE) Price Index, to be released later today, will become a core reference for the market to assess the Federal Reserve's policy direction. Currently, investor sentiment has generally turned cautious, and if the PCE data shows that inflation remains stubborn, the pressure on the global precious metals sector may continue, with asset allocation funds possibly shifting towards high-yield fixed-income instruments.
