Gold edged higher toward $4,600 per ounce on Tuesday as oil prices eased, but reports suggest the precious metal remains on track for its steepest monthly decline since October 2008, based on market data, underscoring pressure from an oil-driven inflation shock that has reshaped investor expectations around interest rates.
The metal has faced sustained pressure throughout March as surging crude prices, driven by escalating tensions in the Middle East, fuel inflation concerns and shift market expectations toward a more hawkish policy outlook. Higher interest rates tend to weigh on gold, which does not offer yields, reducing its appeal relative to interest-bearing assets.
The conflict involving Iran has now entered its fifth week, with no clear signs of de-escalation. Disruptions to global energy flows have intensified after Iran effectively shut off the Strait of Hormuz, a critical route for a significant share of the world’s oil supply, while also threatening key shipping lanes in the Red Sea.
The resulting surge in oil prices has created a complex market dynamic. While geopolitical risk would typically drive investors toward gold as a safe haven, the inflationary impact of rising energy costs has instead strengthened expectations for tighter monetary policy, pushing bond yields higher and weighing on bullion.
Meanwhile, Jerome Powell signaled a cautious but steady policy stance, noting that long-term inflation expectations remain broadly anchored despite heightened uncertainty tied to the conflict. He added that the central bank is well positioned to assess the evolving economic impact before making further policy adjustments.
That stance has reinforced expectations that interest rates could remain elevated for longer, further limiting upside for gold in the near term even as geopolitical risks persist.
For investors, the trajectory of gold is now increasingly tied to the duration of the oil-driven inflation shock and the response of central banks. As long as energy prices remain elevated and policy tightening remains in focus, the traditional safe-haven appeal of gold may continue to be tested.
