Gold Slumps 5% To Year’s Lowest Level Amid Rate Hike Fears

 Gold prices plunged more than 5% on Monday, extending a decline to their lowest levels in 2026 following their worst weekly performance in nearly 43 years. The sell-off comes as escalating conflict in the Middle East stokes inflation fears and bolsters expectations for global interest rate hikes.

Spot gold tumbled 5.8% to $4,226.16 per ounce by 06:33 GMT, marking its weakest point since December 11 and its ninth consecutive session of losses. The metal fell more than 10% last week, its worst weekly showing since February 1983, and is now trading over 20% below its record peak of $5,594.82 reached on January 29. U.S. gold futures for April delivery dropped 7.5% to $4,231.80.

"With the war in Iran entering its fourth week and oil prices fluctuating around $100, expectations have shifted from rate cuts to the possibility of hikes, dampening gold’s appeal from a yield perspective," said Tim Waterer, chief market analyst at KCM Trade. Asian stocks declined as oil prices remained above $110 per barrel.

The closure of the Strait of Hormuz has driven crude prices higher, exacerbating inflation through increased transport and manufacturing costs. While rising inflation typically boosts gold’s appeal as a hedge, higher interest rates limit demand for non-yielding assets. According to the CME FedWatch Tool, market expectations for a Federal Reserve rate hike this year have increased, with interest rate futures suggesting the central bank is more inclined toward hikes than cuts through the end of 2026.

Other precious metals also saw sharp declines; spot silver plummeted 8.9% to $61.76 per ounce, platinum fell 9% to $1,749.31, and palladium dropped 5.2% to $1,330.50.