Gold records its worst weekly performance in 4 decades: Has the "safe haven" lost its luster in the face of the fires of war and the Federal Reserve?
Gold records its worst weekly performance in four decades: Has the "safe haven" lost its luster in the face of war and the Federal Reserve?
In a dramatic turn for global markets, the yellow metal experienced a historic collapse last week, recording its biggest weekly loss since 1983. These sharp declines are driven by a complex mix of military escalation in the Middle East and sudden shifts in US monetary policy.
Record numbers in landing
Gold finished trading on Friday at $4,488 an ounce, after falling 3.5% in a single day, bringing its total weekly losses to 11%. This price slump erased a significant portion of the strong gains gold made last January when it reached $5,500, raising serious questions among investors about gold's continued viability as a "safe haven" during times of major crises.
The trade dispute with Iran: Energy concerns weigh on markets
Since the outbreak of military confrontations between the United States and Israel on one side and Iran on the other on February 28, the gold market has been in a state of turmoil.
Supply disruptions: The war has caused a direct threat to global oil flows, particularly in the Strait of Hormuz, reinforcing fears of a prolonged energy crisis.
Political contradiction: While US President Donald Trump has stated his desire to "calm down" military operations, actions on the ground indicate the opposite, with the deployment of thousands of additional troops and the continuation of airstrikes, keeping the state of uncertainty at its highest levels.
The Federal Reserve's knockout blow
The war wasn't the only factor; gold also suffered a blow from Federal Reserve Chairman Jerome Powell. With energy prices soaring as a result of the war, Powell warned of a new wave of inflation, reinforcing expectations that the Fed would not cut interest rates this year.
The economic principle: When interest rates remain high, investments that generate returns (such as bonds) become more attractive than gold, which does not provide periodic returns, prompting investors to give up their holdings of the precious metal.
Bitcoin's surprise: Digital supremacy at the heart of the crisis
Surprisingly, the digital currency Bitcoin has shown greater resilience than gold during this conflict.
Performance: Since the start of the attacks on Iran, Bitcoin has risen by 11.6% to surpass levels of $70,535.
Comparison: While gold has outperformed Bitcoin over the past 12 months (gold up 48.5% versus Bitcoin down 16.5%), the cryptocurrency's reaction to the current crisis has been more positive, reinforcing the "digital gold" hypothesis among a segment of traders.
Summary: Gold is facing a "perfect storm"; fears of war-induced inflation have tied the Federal Reserve's hands from cutting interest rates, making the opportunity cost of holding gold prohibitively high.
With the metal losing $2 trillion in market value in just a few days, markets are watching to see if the $4,400 level will provide a final support point or if the bleeding will continue.