Gold and silver futures plummeted Thursday to one-month lows after a historic metals rally earlier this year as the Iran war crushed hopes for interest rate cuts anytime soon.
Precious metals are seen as a safe-haven asset thanks to their ability to hold value while other assets fall, and typically spike alongside fears of inflation, economic uncertainty and geopolitical tensions – all of which have been heightened around the US and Israel’s war on Iran.
But gold saw its seventh-straight loss Thursday, down to $4,588.70 an ounce – a far cry from its peak above $5,600 in January. Silver futures also fell to $70.39, from a recent high of about $120.
“The conventional wisdom says wars are supposed to be bullish for precious metals, but the Iran conflict is doing something the textbooks don’t cover – it is pricing in inflation and pricing out rate cuts simultaneously,” Tracy Schuchart, senior economist at NinjaTrader, told The Post.
Iran’s blockade of the Strait of Hormuz, a vital waterway for 20% of the world’s energy supply, has pushed oil prices above $100 a barrel – which Schuchart called “a straight inflation accelerant.”
National average gasoline prices have jumped to $3.88 a gallon, according to AAA, and analysts have warned the shock could ripple across consumer prices – potentially reheating inflation and combining with slow growth to create a toxic mix known as “stagflation.”
“There is no chance the Fed is going to be able to cut rates and that is being realized by metals markets today, and that is why the selling in gold is so pronounced,” Ken Mahoney, CEO of Mahoney Asset Management, told The Post.
Though Fed Chairman Jerome Powell said he thought the use of the term “stagflation” was too extreme, the central bank on Wednesday all the same kept interest rates unchanged in the 3.5% to 3.75% range – firmly in wait-and-see mode as it raised its inflation forecast.
Policymakers forecast just one rate cut in 2026 – a bad move for metals, which typically surge when rates are lowered – and markets dropped the odds of a rate cut next month down to zero, even pricing in a tiny chance of a rate hike.
“That repricing is what matters for gold, because gold doesn’t just trade on fear. It trades on the opportunity cost of holding a zero-yield asset, and that cost just spiked,” Shuchart said.
“Silver, which carries the same rate sensitivity plus industrial demand that gets crushed under stagflation conditions, is getting hammered even harder,” she added. “The safe haven bid from Iran lasted about 48 hours. The rate repricing will last as long as crude stays elevated.”
And oil only continued its climb Thursday, as attacks on critical Middle Eastern energy infrastructure sent Brent crude as high as $119 a barrel, before settling around $104.
Meanwhile, the US dollar has outperformed all other currencies, including the Swiss franc and Japanese yen, and emerged as the clearest safe-haven winner against Treasuries and gold amid the conflict in Iran.
The stronger-than-anticipated greenback has the potential to hit global trade and chip away at US corporate earnings.
“Leveraged clowns are torching gold to plug holes in their oil bets, ETF tourists are bolting because the Iran war just put a bullet through Wall Street’s rate-cut fantasy and the dollar is choking out the commodity complex,” investor Eric Schiffer of the Patriarch Organization told The Post.
But it’s a stark contrast compared to 2022, when gold jumped to a one-year high following Russia’s invasion of Ukraine.
Even its historic rally earlier this year was partially driven by the US capture of Venezuelan dictator Nicolás Maduro, as well as fears over tariffs.
“It is a bit of an enigma. The fact that gold and silver prices have declined during global uncertainty is counterintuitive and may not hold,” Kenin Spivak, chairman and CEO of SMI Group, told The Post.
“For now, the already strong price of these precious metals, strengthening dollar and expectations that the US may not continue to cut interest are each playing a role. Still, I would not bet on price stability if the conflict continues much longer.”
