Gold Holds Decline as Oil Remains Volatile

Gold held near $5,000 per ounce on Monday after falling for two straight weeks, as oil remained volatile after the US attacked Iran’s main oil-export hub of Kharg Island over the weekend, heightening global supply risks. The strike prompted retaliatory attacks from Tehran on Israel and energy infrastructure across other Arab countries. The US-Israeli war on Iran has now entered its third week with no clear resolution in sight, rattling financial markets. Higher energy prices and mounting inflationary pressures have lowered expectations that the US Federal Reserve and other major central banks will cut interest rates, posing a headwind for non-yielding precious metals. The Fed is widely expected to hold its policy rate steady this week, while central banks in the Eurozone, the UK, Japan, Switzerland, Australia, Canada, China, Brazil, and Russia are also set to decide on monetary policy.

Gold prices dropped below $5,050 per ounce on Friday as a strengthening US dollar and fading expectations for interest rate cuts outweighed the traditional safe haven appeal of the precious metal. The dollar strengthened as investors sought liquidity following the announcement of the largest wave of strikes yet against Iranian targets and the effective closure of the Strait of Hormuz. While geopolitical volatility typically drives bullion demand, the threat of persistent inflation from crude oil prices exceeding $100 per barrel has shifted the focus toward yield bearing assets. Market participants have largely discarded the possibility of rate cuts in 2026 as rising energy costs complicate the path toward price stability. This surge in the greenback and Treasury yields has forced liquidations as investors sell gold to cover margin calls and raise cash. The metal is now set for a second straight weekly decline despite the ongoing regional conflict.

Gold prices strengthened to trade above $5,110 per ounce on Friday as investors balanced persistent geopolitical tensions in the Middle East with cooling economic growth in the United States. While crude oil prices continue to fuel inflation fears, the release of revised data showing Q4 2025 GDP growth slowing to an annualized 0.7% has introduced new concerns regarding economic stability. The market currently sees reduced prospects for near term Federal Reserve interest rate cuts as officials weigh the inflationary impact of regional conflict against signs of a cooling economy. Meanwhile, global demand remains a supporting factor with China maintaining its gold buying streak while Indian demand remains subdued due to import duties and price sensitivity.