Gold is having an awful week for a worrying reason

By John Towfighi, CNN

New York (CNN) — The war with Iran is disrupting global oil flows, damaging energy infrastructure and raising fears of prolonged conflict. But gold, usually considered a safe haven during periods of economic uncertainty, has slumped.

Gold has dropped nearly 10% this week, putting it on track for its worst week in 43 years and bringing its decline since the war began to 13%.

In times of turmoil, investors often buy gold, betting it will retain its value if inflation spikes, currencies drop or crisis hits. Yet surging energy prices because of the Middle East conflict are prompting central banks across the globe to rethink the outlook for interest rates. That matters a lot for gold.

The turmoil has also sparked a dollar rebound and prompted investors to reassess their holdings.

Here’s what you need to know:

• Traders expect the Federal Reserve to hold interest rates steady this year, boosting the appeal of yield-bearing investments like bonds and dampening the appeal of gold, which doesn’t pay income.

Fed interest rates are consequential for markets. The Fed just held rates steady for the second meeting in a row. Traders are pricing in no further rate cuts this year, according to CME FedWatch.

Gold soared in the fall when the Fed cut rates three times in a row. Now Fed rates are expected to hold steady for several more months, pushing bond yields up. That raises the opportunity cost of holding gold.

“I do think that in the recent unraveling of gold prices, higher yields have had a big role to play,” said Hardika Singh, an economic strategist at Fundstrat.

It’s not just the Fed: Central banks across the globe are altering their policy rates in response to the Iran war and the disruption to energy prices. Concerns about inflation are prompting central banks to hold rates steady, or in some cases, like the Reserve Bank of Australia, hike rates.

• The US dollar has rebounded this month, making gold — which is priced in dollars — relatively more expensive for international investors.

The US dollar’s trajectory is another key factor for gold.

Gold tends to benefit in a weaker dollar environment, since the yellow metal becomes relatively more affordable for investors around the globe.

The dollar is up 2.2% since the Iran war began, halting a monthslong slide. The rebound in the dollar could be dampening the appeal of gold.

Safe haven demand, nerves about inflation and the prospect of higher interest rates have all boosted the dollar. It’s another signal from markets that traders are worried about how the Iran war could disrupt the global economy.

• Gold had an enormous rally in recent months, and the hype is taking a breather. Investors could also be selling to pay off losses on other assets.

Momentum is waning after gold surged higher across the past two years.

Gold gained 64% in 2025 and posted its best year since 1979. The metal hit $5,000 a troy ounce for the first time in January.

The hype might be fading … for now. Gold on Friday traded around $4,570 a troy ounce, erasing its gains across the past two months.

Gold’s meteoric rise in recent months had in part been boosted by retail investors chasing the rally. Gold in recent weeks had been trading more like a meme stock than a safe haven.

“Upward momentum has faded,” strategists at Dutch bank ING said in a note. “Some investors are selling gold to raise cash or rebalance portfolios.”

Many strategists are still optimistic about the outlook for gold. The US dollar rebound could fade, and geopolitical uncertainty abounds. Gold at $6,000 by year-end is still the target for Wall Street veteran Ed Yardeni.

“However, we are considering lowering our year-end target back to $5,000 if gold continues to defy our expectations that it should be rising on unsettling geopolitical developments, rising inflation, and mounting US government debt,” Yardeni said in a note.

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