Gold's rules challenged by inflation and oil

The article discusses the impact of current financial market conditions on the gold price amid rising geopolitical tensions and energy-related events. Gold has declined by 1.8%, reaching its lowest level since August, despite increasing attacks on energy facilities in the Gulf. The retreat in gold is attributed to rising U.S. Treasury yields, which have surpassed 5% for the first time since October 2023, making gold less attractive as a safe haven since it yields nothing and faces stiff competition from higher returns elsewhere. Conversely, oil prices have risen by nearly 4% due to energy concerns, fueling inflation and leading to expectations of a U.S. interest rate hike, now estimated at around 90%. Additionally, the significant strengthening of the dollar reduces gold’s attractiveness to buyers using other currencies. Data indicates that the current financial environment diminishes gold’s advantages as a safe asset, as it becomes more expensive amid rising yields and a real return that has increased to 2.55%. If yields stay sustainably above 5%, gold could decline further, potentially losing ground to stocks and bonds in the investment competition.

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