Gold drops below $4,900

On Wednesday, international gold prices plummeted, continuing recent declines as investors weighed the risk of the Federal Reserve adopting a more hawkish policy stance. Rising oil prices heightened concerns about a resurgence of inflation.

During the European trading session, spot gold fell below $4,900 per ounce, hitting a new low since February 18, with a daily decline of 2.6%. Spot silver dropped below $77 per ounce, down 2.2% for the day. Spot palladium declined over 3%, to $1,550.64 per ounce.

Nemo.money market analyst Jamie Dutta said, “Investors are worried that, amid high energy prices, interest rates may stay elevated for a longer period… The longer the conflict in Iran continues, the more likely this scenario becomes.” He added that this would weaken gold’s appeal, as it does not generate interest income.

The Middle East conflict has entered its third week, yet gold, a traditional safe-haven asset, has surprisingly remained weak. On Wednesday, Iran’s state television reported that Iran launched missiles at Tel Aviv, claiming it was retaliation for Israel’s assassination of its security official, Ali Larijani.

Although Brent crude oil prices slightly retreated, they still remained above $100 per barrel. The escalation of the Iran conflict and the continued closure of the Strait of Hormuz offset some of the supply concerns that had eased.

High oil prices have driven up transportation costs, intensifying inflationary pressures. While gold is seen as a hedge against inflation and uncertainty, the environment of high interest rates has suppressed its attractiveness—on one hand increasing the cost of holding physical gold, and on the other raising yields on interest-bearing assets.

Additionally, analysts noted that gold’s performance at the start of this year has been quite strong, and the current subdued response to the war reflects that. “The main factor limiting further gains in gold prices is that they have already risen too much,” they said.

The market widely expects the Federal Reserve to keep interest rates unchanged for the second consecutive time when it announces its policy decision later today.

Investors are also watching Fed Chair Jerome Powell’s speech to gauge the central bank’s policy outlook for the remainder of 2026. Futures markets currently project only one 25-basis-point rate cut this year, in September, with another cut not until the end of 2027.

Dutta added, “Long-term drivers such as central banks’ gold purchases, stagflation risks, and diversification needs still exist, which means gold prices could still rise by the end of 2026.”

James Midway, a member of the Progressive Economic Forum, believes that for gold prices to rise significantly, two conditions must be met: “First, the Fed needs to signal clearly that, despite inflation pressures, it will cut rates further… The Fed chairman, who is expected to favor rate cuts similar to Trump’s policies, is expected to take office in May.”

“The second is a change in market expectations regarding the duration of the war. Currently, some believe the conflict could end relatively quickly; however, if the war prolongs and the scope of destruction widens, gold’s appeal will gradually strengthen.”