Spot gold fell 2% on Thursday, trading at $4,001.17 per ounce, as markets digested the dual pressure of rising energy costs and strengthening US Treasury yields.
The decline marks a sharp reversal for the precious metal, which has typically benefited from geopolitical uncertainty, but is now being weighed down by the inflationary implications of the crisis.
Reuters reported that the combination of these factors reinforced market bets on potential US rate hikes.
The sell-off was driven by escalating tensions in the Middle East, which pushed Brent crude prices higher and lifted US bond yields.
Higher yields reduce the opportunity cost of holding non-yielding assets like gold, while rising oil prices stoke fears that inflation could remain sticky, complicating the Federal Reserve’s policy path.
Reuters reported that the combination of these factors reinforced market bets on potential US rate hikes.
This development extends a recent trend of volatility in precious metals.