BERLIN: Gold prices fell more than two percent on Monday, dropping below $4,400 per ounce, as escalating military tensions in the Middle East heightened inflation concerns and strengthened expectations of global interest rate hikes.
The decline comes as the conflict, triggered by joint US and Israeli attacks on Iran on February 28 and Tehran’s subsequent retaliatory strikes, enters its fourth week, reshaping global market sentiment.
Tehran’s warning that it could target energy and water infrastructure across the region, in response to threats by US President Donald Trump, has pushed market risk sentiment to elevated levels.
Despite gold’s strong performance last year — when it gained more than 65 percent amid economic uncertainty, central bank purchases, and a weaker US dollar — analysts say the current environment of rising energy costs and hawkish monetary policy expectations may keep precious metals under pressure in the near term.
Gold has been under sustained pressure, losing more than 11 percent last week alone and falling to its lowest level since January 2.
At the beginning of 2026, the precious metal was trading at $4,321 per ounce before surging to a record high above $5,600 on January 29.
Inflation fears and policy shift
Rising oil prices, which have remained above $100 per barrel, have reversed earlier market expectations of interest rate cuts, with investors now anticipating tighter monetary policy to counter inflationary pressures.
Brent crude has climbed above $110 per barrel amid disruptions linked to the effective closure of the Strait of Hormuz, increasing shipping and production costs globally.
Analysts say these developments have strengthened the US dollar and reduced the appeal of non-yielding assets such as gold and silver.
Investor behaviour shifts
Investor appetite for gold has weakened significantly, particularly among yield-seeking investors, with the metal facing heavy selling pressure over the past two weeks.
Year-to-date gains have narrowed sharply to just $20, reflecting the scale of the recent downturn.
Analysts noted that sharp declines in US stock markets have forced investors to liquidate gold holdings — one of the most liquid assets — to cover margin calls in other markets.
As a result, gold is increasingly being used as a source of immediate liquidity rather than as a traditional safe-haven asset.
Silver also declined alongside gold, falling more than three percent per ounce and slipping below $65.
