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Why has gold lost its appeal despite wars?

Strong dollar and rising yields pressure gold

Despite escalating geopolitical tensions around the world, including conflicts in the Middle East and strained relations between major powers, gold prices have seen a significant decline in global markets. This decline may seem illogical at first glance, given gold's reputation as a "safe haven" for investors in times of crisis.

Has gold lost its luster? Or are there stronger factors now controlling the market?

One of the most prominent factors behind this decline is rising US bond yields, particularly on 10-year Treasury notes. When yields rise, bonds become more attractive than gold, which offers no recurring returns. This also prompts investors to reallocate their portfolios away from gold.

In addition, the strength of the US dollar is putting pressure on gold prices, as a stronger dollar makes it more expensive for investors outside the US to purchase gold, reducing global demand.

Markets are also beginning to expect higher interest rates for longer, boosting the dollar and bonds' gains against gold.

Temporary Factors or Long-Term Trend?

Some analysts believe these pressures on gold may be temporary, especially if crises escalate or the US economy deteriorates. But for now, the balance appears to be tilting in favor of assets that directly reflect returns.

 - Source: CNBC

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