Gold suffered a sharp sell-off on Thursday, as rising oil prices and a firmer interest-rate outlook overshadowed the metal’s traditional safe-haven status. Despite escalating tensions in the Middle East, investors moved away from gold, with continuous gold futures plunging 5.9% to settle at $4,605.70 per ounce, marking a drop of more than $1,000 from the all-time high of $5,626.80 reached on January 29. Silver came under even heavier pressure, falling 8.2% to $71.22, its seventh straight daily decline and the longest losing streak since December 2023.

The weakness in precious metals came as oil prices pushed higher following renewed attacks on key energy infrastructure across the Middle East. Brent crude settled up 1.2% at $108.65 per barrel, reflecting growing concerns that the conflict could disrupt energy supply and keep inflation elevated for longer. For markets, the rise in oil has become more than a geopolitical headline. It is now feeding directly into inflation expectations, reducing confidence that the Federal Reserve will be able to cut rates anytime soon. That shift has significantly changed the backdrop for gold, which had previously benefited from expectations of global monetary easing.

The Federal Reserve’s latest policy decision added further pressure. The central bank left interest rates unchanged, while Chair Jerome Powell signaled that inflation risks remain high and that fewer rate cuts may be needed ahead. For gold, this is a major challenge. Unlike bonds or other interest-bearing assets, gold offers no yield, which makes it less attractive in a higher-for-longer rate environment. As expectations for rate cuts are pushed further into the future, investors increasingly favor assets that can generate returns, leaving gold exposed to a deeper correction after its extraordinary rally over the past two years.

Analysts have pointed out that gold’s recent weakness is especially striking given the broader macro backdrop. Normally, a combination of geopolitical instability, inflation fears, and rising fiscal deficits would be supportive for the precious metal. Yet gold has failed to respond as a classic safe haven. One explanation is simple profit-taking after an exceptionally strong run. Another is that investors may be shifting toward the US dollar, which has also strengthened during the conflict and is competing directly with gold for safe-haven demand. Rising bond yields may also be playing an important role, as higher yields tend to reduce the relative appeal of holding non-yielding assets like bullion.

There may also be a broader liquidity story behind the move. Some investors could be selling gold to cover losses in other markets, particularly in Asia, where recent weakness in equities has raised pressure across portfolios. This kind of cross-market repositioning can amplify downside moves in gold even when the long-term macro case remains supportive. At the same time, central bank demand for bullion, which has been an important pillar of support in recent years, may not be enough to offset the combined impact of stronger yields, a stronger dollar, and fading expectations of easier policy.

The weakness in gold also spilled over into precious-metals equities. Shares of major miners declined sharply, with Freeport-McMoRan falling 4.7%, Newmont dropping 8.7%, and Royal Gold losing 8.4%. The pullback shows that the market is not only reassessing bullion prices, but also revaluing the broader precious-metals complex as investors question whether gold’s massive rally has already peaked.

In the near term, gold now faces an important test. If oil prices remain elevated and inflation expectations continue to rise, the Fed may have even less room to ease policy, which would keep pressure on bullion. At the same time, if the US dollar and Treasury yields stay firm, gold could remain vulnerable to further downside. While the long-term case for gold may still be supported by global uncertainty and central bank buying, the short-term message from the market is clear: safe-haven demand alone is no longer enough when higher oil prices and higher interest rates are pulling capital in the opposite direction.

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