The price of gold fell on Thursday to a six-month low under pressure from several forces at once: tensions in the Middle East, growing expectations of higher interest rates in the United States and SpaceX’s upcoming IPO.
In morning trading, gold fell by more than 1%, reaching $4,022 per troy ounce—its lowest level since late November. That put the metal on course for its worst quarter in almost a decade. Later in the day, the price recovered slightly and was trading at about $4,091.
Gold loses its shine
Since the start of the war in the Middle East, gold has lost more than 20%. The conflict forced some central banks to sell the metal to support their currencies. At the same time, speculative investors who had driven demand for gold late last year and early this year began leaving the market.
“When events began in Iran, people started reducing risk in their portfolios,” said Peter Kinsella, head of investment services at UBP. According to him, investors are selling gold to finance other assets that are not performing, including as part of margin positions. “Any reduction in risk will lead to gold selling,” he added.
In recent months, several central banks have been forced to sell gold. They include Turkey, which sold and swapped $20 billion worth of gold to defend its currency. Russia also sold gold to support budget resources.
One of the main sources of pressure on gold has been the shift in expectations for U.S. interest rates. Rising oil prices accelerated inflation, and traders moved from expecting two or three quarter-point rate cuts by the end of the year to forecasting one quarter-point increase. That strengthened the appeal of U.S. Treasuries and other government bonds compared with gold, which pays no interest.
SpaceX’s upcoming IPO on Friday could put additional pressure on gold prices, according to Panmure Liberum analyst Tom Price. Anthropic and OpenAI are also preparing listings.
“This is a potential source of pressure on gold because investors are looking for where else to continue the trade,” he said. According to Price, gold now looks weak, and the market is looking for the next big story. “And SpaceX is the next big story.”
Jefferies analyst Mohit Kumar believes the coming mega-listings could, in the near term, become an event that draws liquidity out of the market. That is already weighing on gold and crypto assets.
Earlier, a surge of interest in gold and silver among retail investors helped launch a historic rally in which the price of gold doubled at its peak over two years. Private investors, however, then began exiting those positions. Outflows from gold-backed exchange-traded funds intensified the sell-off.
According to the World Gold Council, gold ETFs recorded a net outflow of 55 tonnes from March to May. That broke a nine-month streak of inflows.
Globally, central banks remain net buyers of gold. According to a recent European Central Bank report, gold overtook U.S. Treasuries late last year to become the world’s largest reserve asset by value.