作者：Wall Street CN
The war in the Middle East is rewriting market logic.
Gold, once considered a safe-haven asset, has continued to decline, while silver has experienced a rare plunge. Simultaneously, industrial metals such as LME copper, aluminum, and tin have also suffered heavy losses, resulting in a rare synchronized decline in both precious and industrial metals. The underlying driver is no longer a simple supply and demand logic, but rather the energy shock pushing up inflation and suppressing expectations of interest rate cuts, leading to a double squeeze of tightening liquidity and demand concerns, putting commodities as a whole under pressure.
Middle East conflict fuels inflation expectations, causing gold and silver to lead a sharp decline across commodities.
The escalating tensions in the Middle East have triggered inflation concerns that have severely impacted global commodity markets, with both precious and industrial metals experiencing massive sell-offs.
On Thursday, spot gold briefly fell below $4,600 per ounce, with a daily drop of more than 4%, marking its seventh consecutive day of decline and the longest losing streak since 2023.
Spot silver saw an even more dramatic decline, plunging over 12% intraday and falling below the $66 mark, hitting a new low since February 6th. The Shanghai Futures Exchange's main silver contract fell 14% to 16,120 yuan/kg. According to media reports, Iran and Israel's mutual strikes against key energy facilities in the Persian Gulf region pushed oil prices higher, cooling market expectations for a Federal Reserve interest rate cut and putting pressure on gold, which does not generate interest.
International copper and Shanghai copper fell by more than 3%; liquefied petroleum gas rose by more than 4%.
War pushes up oil prices, suppressing expectations of interest rate cuts.
Nearly three weeks after the outbreak of conflict in the Middle East, oil and natural gas prices have continued to surge, significantly increasing inflation risks. The Federal Reserve kept interest rates unchanged at its policy meeting on Wednesday and lowered its expectation for rate cuts this year to only one. Chairman Powell made it clear that rate cuts would be contingent on a slowdown in inflation.
Analysts believe this statement directly dampened the appeal of gold. Gold itself does not generate interest income, and its holding cost is relatively high in a high-interest-rate environment; once expectations of interest rate cuts narrow, funds tend to flow out of gold assets.
Media reports indicate that gold's price movement since the outbreak of the war has mirrored the decline seen in the summer of 2022. At that time, the Russia-Ukraine conflict triggered a shock to energy prices, which then spread to global markets. Although volatility in the precious metals market has eased compared to the sharp fluctuations of January this year, frequent price swings have deterred some investors seeking safe havens.
ETFs continue to experience outflows, casting doubt on their safe-haven attributes.
According to media reports, physical gold holding instruments, represented by gold ETFs, have seen continuous net outflows in recent weeks, further suppressing gold prices. Gold ETFs are the mainstream channel for Western retail and institutional investors to hold gold, and their demand is particularly sensitive to interest rate changes.
Some investors have begun to view gold as a speculative asset rather than a traditional safe-haven asset. Although the volatility in the precious metals market has subsided compared to the sharp price fluctuations in January, the continued price volatility is still deterring investors seeking safe havens, and the continued outflow of funds is further weakening the support for gold prices.
Industrial metals saw record declines.
In the industrial metals sector, the LME aluminum price saw its largest single-day drop since 2018, exceeding 8%, quickly erasing gains accumulated since the outbreak of the conflict in Iran due to regional supply risks. This indicates that market concerns about the global economic outlook have spread to the industrial demand side.
In addition, LME copper fell more than 5%, last trading at $11,765.5 per tonne; the LME tin main contract plummeted 7%, trading at $42,110.0 per tonne. The commodity market as a whole was gripped by panic selling, with many commodities experiencing declines rarely seen in recent years. After the opening of the Shanghai Futures Exchange's night trading session, SHFE aluminum, SHFE tin, and SHFE gold all fell by more than 5%.
Analysts believe the across-the-board decline in commodity markets reflects investors' combined concerns about the escalating conflict in the Middle East, high energy costs, and obstacles hindering major central banks' monetary policy shifts. Until inflationary pressures show significant signs of easing, the market's repricing of interest rate cuts may continue to put pressure on commodities.
