Gold prices suffered a sharp decline of more than three per cent today, extending a downward trend to hit their lowest levels in approximately four months. The slump comes as escalating tensions in the Middle East trigger fresh concerns over global inflation and the likelihood of higher international interest rates. Spot gold fell by 3.3 per cent to settle at US$4,340.09 per ounce (RM549 per gram), marking a significant ninth consecutive session of losses for the precious metal.
The commodity, which has now reached its weakest point since 2 January, experienced a total value erosion of over 10 per cent during the previous week alone. Similarly, United States (US) gold futures for April delivery saw a more dramatic five per cent drop, falling to US$4,347. This persistent sell-off reflects a shift in investor sentiment as geopolitical risks evolve from driving safe-haven demand to sparking fears of prolonged economic instability and tighter monetary policies.
The regional conflict, which has persisted for three weeks, intensified following a statement from Iran regarding potential retaliatory strikes on the energy and water infrastructure of neighbouring Gulf nations. These comments were made in response to threats from US President Donald Trump to target Iran’s electrical grid within a 48-hour window. The Iranian Revolutionary Guard has further warned that any attack on their power plants would lead to a total closure of the Strait of Hormuz until the destroyed facilities are fully reconstructed.
As a result of these threats, global oil prices have remained elevated above US$110 per barrel, with investors weighing the potential for severe energy supply disruptions against the possible release of Iranian oil reserves into the market. The prospect of a closed Strait of Hormuz continues to prop up crude prices, which in turn drives global inflation by increasing manufacturing and transportation costs. While rising inflation traditionally boosts the appeal of gold as a hedge, the current environment of high interest rates is curbing demand for non-yielding assets.
Market pricing for US Federal Reserve interest rate hikes has increased significantly, with a rate increase now seen as more probable than a cut. According to the CME FedWatch tool, there is currently a 27 per cent probability of a rate hike by December. The broader precious metals market also faced downward pressure today, with spot silver dropping 3.3 per cent to US$65.55 per ounce and platinum falling 4.4 per cent to US$1,838.45, while palladium saw a marginal decline of 0.4 per cent to US$1,398.50.
