Gold is having the kind of month that makes safe-haven investors question the whole concept of safe havens. Spot prices have dropped to around $4,000 per ounce, a roughly 28% decline from January’s peak near $5,595, as a cascading series of geopolitical and macroeconomic forces conspire against the metal.
War drives oil, oil drives inflation, inflation drives the Fed
US airstrikes targeting Iranian military infrastructure began around July 15-16, following Iranian attacks that had already rattled markets. On July 17, two US service members were killed in a conflict-related incident in Jordan, escalating tensions further.
The immediate market reaction was predictable: oil prices spiked approximately 12% as traders priced in the risk of supply disruptions from one of the world’s most critical energy-producing regions.
That oil price surge is the domino that eventually tips gold over. Higher energy costs feed directly into inflation, which had already been a persistent concern for central bankers. Market analysts have now adjusted their Federal Reserve rate hike expectations in response to rising energy prices and the broader inflation risk they carry.
