Gold Set for Sharpest Weekly Drop in Six Years; Wall Street Warns: Don’t Rush to Buy the Dip!
Gold prices are poised to record their largest weekly decline in six years as the ongoing conflict in the Middle East drives energy prices higher, effectively dampening expectations for global central bank rate cuts.
Several Wall Street analysts have issued warnings that gold remains trapped in a period of high volatility with potential for further short-term selling, advising investors against bottom-fishing at this stage.
Gold Marks Steepest Weekly Decline Since 2020
As of Friday, gold prices hovered around $4,700 per ounce, representing a nearly 8% cumulative drop for the week—the sharpest contraction since March 2020. Simultaneously, silver fell to approximately $72 per ounce, a weekly decline of roughly 10%, while palladium and platinum are also tracking toward weekly losses.
The surge in international crude oil, natural gas, and fuel prices triggered by the Iran conflict has ignited broad inflationary fears. This has reduced the likelihood of central banks lowering borrowing costs, creating a significant headwind for non-yielding bullion.
Despite its reputation as a "safe haven," gold has now suffered three consecutive weeks of declines since the U.S. and Israel launched strikes against Iran last month.
Liquidity Squeeze and Rising Yields
A key driver behind the sell-off is investors offloading gold to cover losses in other asset classes as U.S. Treasury yields and the U.S. Dollar climb. Rising yields increase the opportunity cost of holding non-interest-bearing assets like gold. Furthermore, gold-backed ETFs have faced massive liquidations.
"Do not blindly buy the dip—the volatility is simply too high," warned Robert Gottlieb, an independent market commentator and former precious metals trader at JPMorgan. "We may see more selling before the volatility subsides and prices stabilize."
The current market behavior mirrors the 2022 onset of the Russia-Ukraine conflict. Following that escalation in February 2022, gold embarked on a seven-month losing streak—the longest on record—as energy shocks reverberated through global markets.
Technical Indicators Signal Further Downside
Analysts at Yardeni Research attribute the slump to profit-taking, rising Treasury yields, and shifting investor positioning. They suggest the correction reflects investors locking in gains following gold's massive rally over the past year. As the Dollar strengthens amid the Iran war, capital appears to be rotating out of gold and into greenbacks.
Technical factors are also weighing on the metal, as gold has broken below its short-term upward trendline. Yardeni Research noted that gold climbed too far and too fast earlier this year. After breaching its long-term trend channel, the metal may now test support near $4,000—implying a further 14% downside from current levels.
"Our original thesis was that gold should rise amid geopolitical turmoil, rising inflation, and ballooning U.S. debt," the analysts stated. "However, if the price action continues to defy our expectations, we are considering lowering our year-end target from $6,000 to $5,000."