Global gold prices declined over the past week, shedding 1.9% despite briefly hitting a two-month high. The drop is attributed to easing investor anxiety following US President Donald Trump's decision to delay action on potential military intervention in the escalating Iran-Israel conflict. According to Gold Bullion, gold opened the week at $3,440 per ounce and closed at $3,368, having briefly peaked at $3,451—the highest level in nearly two months—before falling to a weekly low of $3,340. The price decline came amid growing risk appetite among investors, spurred by Thursday's White House announcement that President Trump would postpone any decision on US military involvement for at least two weeks. The move is widely viewed as a diplomatic strategy to pressure Tehran back to the negotiating table. Markets reacted swiftly, with investor fears of an imminent US strike receding despite continued escalation between Iran and Israel throughout the week. Many traders, however, remained cautious, refraining from making aggressive long- or short-term bets on gold amid continued regional instability. Adding to the downward pressure on gold, the US Federal Reserve left interest rates unchanged at 4.50% this week, in line with market expectations. Fed Chair Jerome Powell indicated that the full impact of recent tariff measures may take time to reflect in economic data but reaffirmed that current conditions remain consistent with the central bank's policy stance. The Fed also revised its economic outlook, forecasting a slower GDP growth rate of 1.4% for the year, down from 1.7%, while raising its inflation projection to 3% from 2.7%—a signal of mild stagflation. Despite maintaining their projection for a 50 basis point rate cut in 2025, policymakers scaled back expectations for further cuts in the following two years by just 25 basis points. These revisions, along with the prospect of sustained inflation and a more measured pace of rate cuts, strengthened the U.S. dollar, which has historically had an inverse relationship with gold. A stronger dollar typically exerts downward pressure on gold prices, as gold becomes more expensive for holders of other currencies. Meanwhile, a new report by the World Gold Council highlighted a strategic shift by central banks toward gold. Based on a survey of 73 central banks, 76% indicated plans to increase their gold holdings over the next five years, up from 69% last year. At the same time, 75% of respondents anticipated a decrease in the proportion of dollar-denominated assets in their reserves, compared to 62% in the previous year. The Council attributed this trend to gold's historical resilience in times of crisis, its diversification benefits, and its effectiveness as a hedge against inflation—factors that are increasingly relevant given today's volatile geopolitical and economic climate.
