Gold drops early Monday as oil prices spike and inflation fears loom driven by the escalating conflict in the Middle East, which extended into a second week.
Oil prices climbed around 30% Monday morning, heightening fears of worsening inflation, which may necessitate keeping interest rates elevated. High interest rates are considered bearish for precious metals because they make them less attractive investments in comparison to other assets.
The war has finally stalled gold’s massive rally in 2025 and the first two months of this year, which took the yellow metal to historic highs comfortably above $5,000 an ounce. It’s still up almost 20% this year. Oil prices soared as Mideast producers began trimming production and traffic through the chokepoint at the Strait of Hormuz effectively halted.
April gold futures dropped 1.7% last week to settle at $5,158.70 an ounce on Comex, though they rose 1.6% Friday. Bullion surged 11% in February after climbing 9.3% in January and rising 2% in December. It rallied 64% last year. The April contract is currently down $67.60 (-1.31%) an ounce to $5091.10 and the DG spot price is $5082.90.
While the yellow metal has at some times of geopolitical and economic crisis played a traditional role as a hedge against uncertainty, this time has been different, with some analysts speculating that investors may need to raise cash for other trades by closing out gold positions.
Additionally, physical gold in places like Dubai – one of the world’s key told trading hubs – is being offered at a discount because the yellow metal is trapped there because of a shutdown in transportation from the war, Bloomberg reported.
In economic news, investors will be watching this week for two key U.S. inflation reports – the consumer price index for February on Wednesday and the delayed January personal expenditures price index – the Federal Reserve’s favorite inflation measure – on Friday. The end of the week will also bring January data on fourth-quarter GDP and January personal spending as well as March preliminary consumer sentiment.
The Fed is set to meet on monetary policy late this month and policymakers will be looking at inflation and the labor market for cues. On Friday, the key monthly U.S. jobs report for February showed nonfarm payrolls unexpectedly fell by 92,000, compared with the estimate for 50,000, and the unemployment rate ticked up to 4.4%.
More than 97% of the investors tracked by the CME FedWatch Tool are betting that the Fed will keep interest rates unchanged again this month, with the rest anticipating a 25 basis point cut. The Fed reduced interest rates for a third consecutive time in December to 3.50% to 3.75%. The central bank began raising interest rates in March 2022 to fight inflation, ultimately imposing increases of by 5.25 percentage points before beginning rate cuts in 2024. The central bank kept interest rates unchanged in January after three previous rate cuts.
Currently, investors don’t expect the Fed to cut rates until the second half of the year, the CME tool shows.
Front-month silver futures slid 9.6% last week to settle at $84.31 an ounce on Comex, though the May contract gained 2.6% Friday. It touched a record above $115 in January. Silver gained 19% last month after advancing 11% in January and climbing 24% in December. It rose 141% last year. The May contract is currently down $0.036 (-0.04%) an ounce to $84.275 and the DG spot price is $84.00.
Spot palladium decreased 7.3% last week to $1,667.50 an ounce, though it increased 1.2% Friday. Palladium gained 8.8% in February after advancing 2.4% in January and increasing 11% in December. Palladium gained 74% last year. Currently, the DG spot price is down $10.90 an ounce to $1646.50.
Spot platinum declined 9.2% last week to $2,148.50 an ounce, though it added 0.4% Friday. It advanced 15% last month after gaining 1.4% in January and surging 22% in December. Platinum increased 122% in 2025. The DG spot price is currently down $6.10 an ounce to $2145.60.
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