Gold Posts Its Largest Weekly Drop in Six Weeks Even as the Iran War Widens

Gold fell this week even as the war intensified. Even as the United States and Iran exchanged strikes for a seventh night, bullion recorded its steepest weekly decline in about six weeks, Economic Times reported.

The lower price drew buyers back rather than deterring them. Consumers returned to jewellery stores after the price reductions, and investors used the dip to add to holdings, according to the same report. Silver drew more caution, with investors reducing exposure.

The pattern deserves careful interpretation. A war that would normally raise the price of the classic safe-haven asset instead coincided with a price fall, which points to the other force acting on gold, namely expectations for the dollar and for real interest rates. When markets price a firmer dollar and policy rates that stay higher for longer, the opportunity cost of holding a non-yielding metal rises, and that can outweigh demand driven by the conflict. The steady return of physical buyers on weakness, however, signals that structural demand for a fixed-supply asset has not disappeared.