Gold plunged over 1.80% on Friday, falling below the psychologically critical $4,000 mark to trade at $3,994 as escalating tensions between the United States and Iran triggered a sharp reversal in precious metals sentiment. The drop comes as fears of potential Iranian oil supply disruptions sent energy prices surging, reigniting inflation concerns that could force the Federal Reserve to maintain its hawkish monetary policy stance longer than markets previously anticipated. Traders are now reassessing their Fed rate cut expectations, with higher oil prices threatening to keep consumer inflation elevated throughout 2025. The sell-off in gold reflects a swift recalibration as investors weigh whether persistent energy-driven inflation will keep real yields elevated, reducing the appeal of non-yielding assets like bullion. Forex and commodity traders are closely monitoring Middle East developments as crude oil volatility continues to drive cross-asset repositioning, particularly affecting precious metals and inflation-sensitive currency pairs.
FXnCO Insight
Traders should watch crude oil levels closely—sustained prices above key resistance could cement hawkish Fed pricing and pressure gold toward $3,900 support.
Source: FXStreet