Gold prices are under pressure as markets reprice interest rate expectations amid concerns that the conflict in the Middle East could reignite global inflation, according to eToro market analyst Josh Gilbert. He noted that heavy selling of gold miners and the precious metal itself is being driven by these macroeconomic factors. eToro is a social investment network that allows users to trade and invest in a variety of assets. The company provides access to various financial instruments and markets.
Gilbert highlighted a significant shift in market sentiment, stating that as recently as last Friday, markets had fully priced in two rate cuts from the US Federal Reserve this year. However, surging energy prices tied to the escalating conflict involving Iran have triggered a dramatic rethink, with traders now seeing just an 80 per cent chance of a single rate cut. This repricing is contributing to a stronger US dollar and rising bond yields, creating a ‘double headwind’ for gold, which is priced in dollars and offers no income.
He drew parallels to the market reaction following Russia’s invasion of Ukraine in 2022, when oil prices surged, inflation spiked globally, and the Federal Reserve responded with aggressive rate hikes. This strengthened the dollar and led to a decline in gold prices for much of that year. Gilbert warns of a potential repeat, with the Iran conflict potentially pushing energy prices high enough to force central banks into a more hawkish stance than currently anticipated by markets.
The physical gold market is also experiencing disruptions, with the UAE, a key region for the global gold trade, facing shipment challenges due to airspace closures. Land transport is considered too risky for high-value metals in the region, leading to an indefinite pause in shipments to and from Dubai. While this supply bottleneck may not immediately impact spot prices, it adds a layer of tightness that could support prices once the current selling pressure subsides, according to Gilbert.
