Gold falls below $5,000 as US-Iran war enters third week
What's the story
Gold prices have fallen below $5,000 per ounce as the war between US-Israel and Iran enters its third week. The decline comes after a spike in oil prices due to attacks on key energy infrastructure over the weekend. Bullion prices fell by up to 1% in early trading today, marking their second consecutive weekly drop.
Market impact
Impact of Middle East conflict on global economy
The ongoing conflict has raised energy prices and inflationary concerns, which have lowered expectations of interest rate cuts by the US Federal Reserve and other central banks. Crude oil prices surged after US attacks on Iran's main oil-export hub were met with retaliatory strikes by Tehran on energy infrastructure in various Arab states.
War impact
Uncertainty surrounding duration of conflict and its economic impact
The duration of the ongoing war remains uncertain, making it difficult to assess its impact on markets and the wider economy. An aide to President Donald Trump said the conflict could last four to six weeks, while both sides have given mixed signals. Despite these uncertainties, traders now see virtually no chance of a rate cut at this week's Fed meeting.
Future outlook
Gold's potential as a safe haven amid stagflation fears
While rising oil prices could weigh on gold in the near term, fears of stagflation (slow growth plus high inflation) could drive investors to gold as a better store of value over the longer term. Spot gold fell 0.7% to $4,986.34 an ounce as of 7:26am in Singapore today while silver also witnessed a similar fall to $80.