Gold (GC=F) futures pared losses on Monday morning, falling 3%, as the precious metal shifted from strong momentum trading earlier this year to a loss-making bet during the Middle East conflict.
Spot gold fell more than 10% last week, plummeting to around $4,288 an ounce, its worst weekly performance since 1983.
“This has been an extremely brutal sprint,” Greg Shearer, head of base and precious metals strategy at JPMorgan, said on Friday.
“But from our perspective, it tells us more that gold is caught in the contagion risk of a sell-everything trade,” he added.
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Gold and other precious metals have been selling off as a surge in oil prices triggered by conflict in the Middle East has boosted inflation expectations and raised concerns that the Federal Reserve and other central banks may not cut interest rates this year. In Europe, which relies heavily on oil imports, officials have raised the possibility of raising interest rates.
A strong dollar and rising bond yields have caused gold prices to fall more than 14% since the war began, as the appeal of this non-yielding asset has diminished.
“In the short term, a stronger dollar and gold’s high liquidity could make it a source of funding during times of stress,” ING commodities strategist Ewa Manthey wrote on Friday.
While gold prices have started the year on a strong note after posting a historic 65% gain in 2025, investors are increasingly concerned that central bank structural support underpinning the market could change amid tight liquidity conditions.
“I think the market is concerned that a combination of economic, energy and foreign exchange pressures could trigger a dramatic change in central bank gold flows and buying behavior,” JPMorgan’s Shiller said.
Still, JPMorgan analysts remain bullish on the long term.
“The longer the energy disruption persists, the greater the impact on inflation and, more importantly, growth, and we continue to believe the backdrop for gold could quickly turn materially bullish,” analysts wrote last week.
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They added that a deterioration in the economy would exacerbate “the employment priority of the Fed’s dual mandate, leading to a sharp shift toward easing policy.”
The broader metals complex was also hit, with silver (SI=F) and copper (HG=F) falling sharply on concerns about demand destruction.
Ines Ferre is a senior business reporter at Yahoo Finance. Follow her on X: @ines_ferre.
