Geopolitics or speculation: why gold lost 0.5% of its price
16 June 2025 17:03
Gold futures in the United States fell by 0.5%, dropping to $3,434.80 per ounce after reaching a two-month peak amid tensions between Iran and Israel. The market reacted with a correction after the rally, which was caused by geopolitical risks, in particular the aggravation of the situation in the Middle East, "Komersant Ukrainian" reports with reference to Reuters.
Financial experts explain that this was a speculative growth caused by risk, not fundamental changes in the market.
There were no supply cuts, the economy is working normally. It’s psychology and temporary risk avoidance,” explained Kevin Wong, senior market analyst at OANDA.
However, not all experts predict a quick correction to pre-rally levels. The market is still focused on two main issues:
1. Geopolitical tensions in the Middle East. Iran and Israel have not yet put an end to their confrontation. This creates the ground for new outbreaks of hostilities, to which the currency and precious metals markets will react.
Keep in mind that the gold price has been rising over the past few sessions, largely in response to the conflict between Israel and Iran. Today, we are seeing more of a pullback, probably due to profit-taking after this rise,” said David Meagher, Director of Metals Trading at High Ridge Futures.
2. The Fed’s monetary policy. The Federal Reserve’s interest rate decisions also affect gold pricing. The lower the rate, the cheaper it is to store this asset, which plays into the growing demand for it.
At the moment, the Fed seems inclined to stay on hold, given the significant uncertainty in the economy, from tariffs to geopolitical tensions. Therefore, it is not surprising that the Fed will postpone any interest rate cuts, effectively putting the issue on hold,” explained Meagher.
Read also: New historical record: gold has not been so expensive for thousands of years
Meanwhile, the gold market is still very tense. Gold prices are currently hovering around $3,414.32 after a temporary peak above $3,500.
This situation is due to the fact that bullion is currently seen as a precautionary measure in times of geopolitical instability and rising inflation. The metal also benefits from low interest rates, as it does not offer any lucrative income.
It is worth noting that some financial institutions are making bold forecasts for 2025-2026. In particular, Bank of America and Goldman Sachs expect the price to rise to $4,000 per ounce due to buyers from global central banks and naturally high demand for this asset as a hedge against turbulence.
Thus, gold is now becoming an asset that helps to understand the level of tension on the global stage. The market reacts quickly to all changes – from drone strikes in the Middle East to Fed decisions – thereby giving an accurate picture of the state of the global economy and investor psychology.
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