Why gold prices are not rising even in the Iran-Israel war

Even though the Iran-Israel war has entered its 18th day, the price of gold in the global market has remained unexpectedly stable. Usually, investors turn to gold as a safe haven during times of global conflict or instability, but this time the situation is different.

Oil prices have exceeded $100 per barrel due to the closure of the Strait of Hormuz in this war that began on February 28, but spot gold prices have stagnated around $5,000.

According to economists, there are three main reasons behind the price of gold not rising. First, investors believe that the US Federal Reserve may increase interest rates further due to rising inflation. When interest rates increase, the dollar becomes stronger and the attractiveness of investing in non-interest-bearing assets like gold decreases. Second, since the beginning of this year, the price of gold has been at historically high levels, which has become an obstacle to a new price increase.

Analyst Rebecca Christie said that the strong dollar and the fact that gold is traded in dollars in the international market have made it difficult for investors to increase prices again. In addition, gold is currently seen as a 'speculative' asset in the current market. Due to its volatile behavior, large investors such as central banks are now somewhat risk-averse.

According to experts, two things need to happen for a major change in the gold market. Any indication of a rate cut by the new head of the Federal Reserve in May and a clear fear that this war will be prolonged. In the current situation, market participants believe that the war may end quickly, but if the conflict is prolonged and the losses increase, the price of gold as a safe investment may increase again.

Source: Al Jazeera.