Gold falls seven days in a row despite war, interest rate expectations weigh more heavily

The gold price is under pressure and is now recording the seventh consecutive day of decline. This is striking because of the escalating war between Iran and Israel. Instead of rising as a safe haven, gold is actually being held back by rising interest rate expectations, a strong dollar and rising energy prices.

War drives inflation and slows gold

Today, gold is also down by approximately 1.5 percent and is heading for the longest losing streak since October 2023. This makes it clear that geopolitical unrest currently has less influence on the price than macroeconomic factors.

The war in the Middle East has pushed up oil and gas prices, increasing inflationary pressures. This reduces the chance of a rapid interest rate cut by the US central bank. The Federal Reserve indicated this week that there may be only one interest rate cut this year, and only if inflation continues to decline.

For gold, which does not earn interest, this is a major headwind. Higher interest rates make alternatives such as government bonds more attractive. At the same time, rising inflation, partly due to expensive energy, creates a “higher-for-longer” scenario.

In addition, the strong US dollar plays a crucial role. Because gold is traded in dollars, a more expensive dollar makes the precious metal less attractive to international investors and itself acts as an alternative ‘safe haven’.

It is striking that gold therefore reacts less strongly to geopolitical tensions than in previous crises, such as during the war in Ukraine.

Market mechanisms reinforce decline, impact visible in crypto

In addition to macroeconomic factors, market mechanisms also play a role. Investors sell gold positions to absorb losses elsewhere, for example through margin calls. This increases the downward pressure.

Since the outbreak of war in the Middle East at the end of February, gold has lost almost 9 percent. On an annual basis, the precious metal is still well up. The broader markets are also feeling pressure. Bitcoin (BTC) and other crypto assets remain volatile, partly due to declining retail sentiment and tighter financial conditions.

The current situation shows that it is not geopolitical uncertainty, but mainly monetary policy and currency movements that determine the direction of gold. As analysts point out, the strength of the dollar and the prospect of higher interest rates currently outweigh gold’s traditional role as a safe haven.