ING’s Commodities Strategist Ewa Manthey explains why Gold has dropped about 12% since the Iran conflict began, despite its reputation as a safe haven. She argues the move reflects macro headwinds from higher Oil prices, stronger US Dollar (USD) and elevated real yields. ING remains constructive on Gold, projecting prices to reach $5,000/oz by year-end, supported by central bank demand and improving ETF flows.

Macro headwinds mask safe haven role

"Gold’s safe-haven appeal tends to perform best in a financial crisis or growth shock – when real yields fall and the dollar weakens. A supply-driven energy shock does the opposite. Higher oil prices push inflation up, keep central banks on hold and strengthen the dollar, all of which weigh on gold."

"The Federal Reserve left rates unchanged in April and the tone from Chair Jerome Powell was cautious. Inflation has re-accelerated since the war began and the case for near-term easing has weakened. Our US economist still expects easing in the second half of the year, but a prolonged energy shock could push that back."

"Gold has given back some of last week’s gains, after President Trump rejected Iran’s latest peace proposal as “totally unacceptable”. The setback keeps the ceasefire timeline uncertain and inflation risks elevated – reinforcing the higher-for-longer rate narrative that has weighed on gold throughout the conflict. A durable resolution remains the key catalyst for a sustained gold recovery."

"We remain constructive, but the stalling of peace talks adds near-term uncertainty. Trump’s rejection of Iran’s latest proposal keeps the ceasefire timeline unclear and inflation risks elevated, which limits the Fed’s room to cut."

"We now see prices rising to $5,000/oz by year-end. The main downside risk is a breakdown in peace talks that keeps energy prices elevated and the Fed on hold into year-end."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)