"Gold plunges 7% in a week"…Largest weekly drop in nearly six years in sight

International gold prices are increasingly likely to post their biggest weekly decline in nearly six years.

According to Bloomberg on the 19th (local time), spot gold extended losses for a seventh straight session and, as of the morning of the 20th (Korea time), stood at $4,686.62 an ounce. It is down about 7% so far this week, putting it on track for its steepest drop since March 2020.

The weakness in gold is being attributed to a surge in oil prices in the wake of the Iran war, which has fueled inflation concerns and in turn damped expectations for interest-rate cuts. Because gold is a non-yielding asset, its investment appeal diminishes when expectations for rate declines fade.

In the interest-rate futures market, traders have priced in a 76% probability that the U.S. policy rate will be left unchanged at the current level (3.50–3.75%) through year-end—a sharp retreat from pre-war expectations for cuts. Fund flows have also worsened. Gold ETFs (exchange-traded funds) have seen outflows for three consecutive weeks, with holdings down by more than 60t.

Still, gold is up about 8% year-to-date. In January, it neared $5,600 an ounce, marking a record high. Analysts said, "Gold is a safe haven, but it is more heavily influenced by changes in rates and liquidity conditions."

Reporter Song-ryeol Lee, Hankyung.com yisr0203@hankyung.com