Gold price falls back to $4,500 on heightened inflation fears

Gold extended its decline on Friday amid a broader market selloff triggered by elevated concerns over global inflation and its implications on central bank policies.

Spot gold fell as much as 3% towards the $4,500/oz. level, wiping out all its gains from the past two trading weeks.

The move coincided with a drop in stock markets, after bond yields surged across the globe as doubts mounted over how quickly Middle Eastern oil supplies can return to normal, while the US dollar continued to rise. That has placed bullion under further pressure, as it tends to thrive when yields and the greenback are lower.

Other metals, including silver and copper, also saw declines of 10% and 3% respectively to erase their earlier-week gains as well.

The commodities have been weakened by the Middle East conflict, as the closure of the Strait of Hormuz invoked worries of a global energy crisis and kept inflation concerns high. Gold has lost 13% since the Iran war started in late February.

“There was a sell-off across the (precious metals) for a couple of ​reasons. The dollar is quite strong today. We’re also seeing not just a US increase, ​but a global increase in (bond) yield rates,” said Edward Meir, an analyst at Marex, told Reuters.

Yield pressure still on

Meanwhile, a lack of breakthrough in China-US talks with respect to ending the war did little to assuage concerns over inflation and, by extension, higher interest rates.

“The Chinese really didn’t offer much help in resolving the conflict, and we’re seeing crude oil move up, which reinforces the inflation narrative, and that’s been very bearish for the metals,” Marex’s Meir added.

Earlier this month, gold had rebounded above $4,700/oz. following a US proposal to end the conflict, though no resolution was reached after days of back-and-forth talks.

Following the latest developments, the market is now pricing in a more than 50% chance of a rate hike next January, according to Kalshi.

“Inflation expectations, higher yields and a stronger dollar are likely to keep gold under pressure in the near term,” ANZ Group Holdings analysts Daniel Hynes and Soni Kumari wrote in a note to Bloomberg. The Australian bank also deferred its $6,000/oz. price target to mid-2027 from early next year.

Despite this week’s drop, bullion remains up by 6% on the year, helped by a record rally in January that saw prices surge to a record of nearly $5,600/oz.

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