Gold extends losses amid ‘brutal flush’
Gold (GC=F) futures pared losses by 3% on Monday morning as the precious metal turned from strong momentum trading earlier this year to a losing bet amid the Middle East conflict.
Spot gold fell more than 10 percent last week to about $4,288 an ounce, following its worst weekly performance since 1983.
“This is an extremely brutal attack,” said Greg Shearer, JPMorgan’s head of base and precious metals strategy. on Friday.
“But from our perspective it’s more about gold getting caught up in the risk of expansion of the sell-everything trade,” he added.
Read more: Are you thinking of buying gold? Here’s what investors should pay attention to.
Gold and other precious metals were in selling mode as rising oil prices from conflict in the Middle East boosted inflation expectations and raised concerns that the Federal Reserve and other central banks may not be able to cut interest rates this year. In Europe, which is largely dependent on oil imports, authorities revealed this possibility We are talking about an interest rate increase.
The strong US dollar (DX-Y.NYB) and rising bond yields have caused gold prices to fall more than 14% since the beginning of the war; Because assets without returns have become less attractive.
“In the short term, a stronger US dollar and gold’s higher liquidity could make it a source of funds during times of stress.” Ewa Manthey wrote: commodity strategist at ING, last Friday.
As gold begins the year with momentum following a historic 65% rally in 2025, investors are increasingly concerned that the structural support of central banks supporting the market could slip due to liquidity constraints.
“I think there are concerns in the market that the combination of economic, energy and currency pressures could trigger a major shift in the central bank’s gold flow and purchasing behavior,” JPMorgan’s Shearer said.
But over the long term, JPMorgan analysts are still bullish.
“The longer the energy outage lasts and the greater the inflation and, more importantly, growth impacts, we think gold’s backdrop will quickly rise materially,” analysts wrote last week.
Read more: How to invest in gold in 4 steps?
They added that the economic deterioration would reinforce “a sharp shift toward Fed easing as the employment side of the Fed’s dual mandate takes priority.”
The broader metal complex was also negatively affected; silver (SI=F) and copper (HG=F) saw sharp declines amid concerns about reduced demand.
Ines Ferre is Yahoo Finance’s senior business reporter. Follow him on X @ines_ferre.
