Gold Dips for the Week Amid Easing Middle East Tensions and Fed Inflation Concerns

Highlights:

• Gold slips nearly 2% this week, heading for its first weekly loss in three weeks amid easing Middle East tensions and reduced haven demand.
• Federal Reserve Chair Jerome Powell warns of inflation risks, dampening hopes of imminent rate cuts and adding pressure on gold prices.
• Despite the dip, gold remains up 30% in 2025, though investors are increasingly turning to silver and platinum as alternative safe-haven assets.

Investor Caution Grows as Safe-Haven Demand Wanes

Gold is on track for its first weekly loss in three weeks, as a decrease in geopolitical tensions in the Middle East and cautionary signals from the US Federal Reserve weighed on safe-haven demand. At the time of writing, spot gold was trading near US$3,370 an ounce, marking a nearly 2 per cent decline for the week.

The pullback comes as the threat of a broader conflict in the Middle East appears to be receding. A spokesperson for US President Donald Trump confirmed that a decision on whether the US will support Israel in its conflict with Iran is expected within two weeks—signaling a pause that has eased fears of a widespread regional war, which had previously driven up demand for gold.

Interest Rate Outlook Adds Pressure

Adding further pressure on gold prices, Federal Reserve Chairman Jerome Powell earlier this week warned that President Trump’s ongoing tariff policies could reignite inflation. This, in turn, could delay or reduce the likelihood of interest rate cuts—a key factor that typically supports gold prices, as the metal does not yield interest and performs better in low-rate environments.

Gold’s Long-Term Rally Intact—For Now

Despite this week’s dip, gold has gained roughly 30 per cent so far in 2025, and remains within reach of its record high of US$3,500 an ounce, set in April. However, recent market movements suggest that investors may be rotating into alternative precious metals such as silver and platinum, which are currently perceived as more attractively priced haven assets. If geopolitical tensions remain contained and the Fed maintains a cautious stance, gold may face more pressure in the short term.

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