Gold slides as dollar strengthens and Iran war fans inflation fears

Global gold prices fell by more than 1% on Thursday as the US dollar strengthened and expectations of interest-rate cuts faded, while the continuing Iran war added to concerns over inflation. Spot gold was down 1.1% at $5,118.16 an ounce by 1.31pm US Eastern Time, while US gold futures for April delivery settled 1% lower at $5,125.80.

Reuters reported that the dollar rose for a third straight session. The greenback is a rival safe-haven asset to gold, and a stronger dollar makes bullion more expensive for holders of other currencies. Phillip Streible, chief market strategist at Blue Line Futures, said the higher dollar index, rising US Treasury yields and the lack of interest-rate cuts were negative factors for gold, although the conflict in the Middle East was still generating some safe-haven demand.

The latest leg down in gold came as the Iran war intensified concern that higher oil prices could keep inflation elevated. Reports of burning tankers in Iraqi waters and wider disruption to Middle East energy supplies sent oil prices surging towards $100 a barrel, fuelling worries that central banks could be forced to keep interest rates higher for longer. Goldman Sachs has already pushed back its forecast for US Federal Reserve rate cuts, citing the inflation risks created by the conflict.

Higher oil prices raise transport and production costs, adding to inflationary pressure. Although gold is often seen as a hedge against inflation, higher interest rates tend to reduce its appeal compared with yield-bearing assets. Streible said that if oil prices could be prevented from rising much further, gold would remain in a relatively good position. He added that the main bullish support for gold continued to come from central bank purchases and steady exchange-traded fund inflows throughout the year.

In a notable development, Chile’s central bank announced a major gold purchase for the first time since 2000. In February, the bank lifted the value of its gold reserves to $1.108 billion from $42 million in January, equivalent to 2.2% of its total reserves.

Other precious metals also weakened on Thursday. Spot silver fell 1% to $84.90, although it had surged more than 146% last year. Analysts at BMI said in a research note that they expect silver to average $93 an ounce in 2026, supported by strong investment demand that should offset softer consumption from the solar and jewellery sectors as prices remain high. Spot platinum fell 1.1% to $2,145.75, while palladium slipped 1% to $1,620.86.

By Friday morning in Asia, however, gold had steadied after two days of losses. Bloomberg reported that spot gold rose 0.2% to around $5,089.13 an ounce at 6.49am Singapore time, while silver also edged up 0.2%. Platinum and palladium posted gains as well, and the Bloomberg Dollar Spot Index was little changed after climbing 0.5% in the previous session.

Gold was trading at about $5,090 an ounce in Friday morning dealings after dropping more than 2% over the previous two sessions. The conflict between the United States, Israel and Iran has created extreme volatility across commodity and financial markets, with investors at times selling precious metals to meet margin calls elsewhere in their portfolios. Even so, gold remains up strongly this year and has largely held above the psychologically important $5,000-an-ounce level.