Safe-haven fails as gold plunges 3%, "inflation trade" is strangling the "war trade"

⑴ As Iran threatens to retaliate for attacks on its energy facilities and designates the oil facilities of three Middle Eastern countries as legitimate targets, market tensions have risen sharply. ⑵ However, the market response has shown a rare divergence: oil prices surged, with Brent crude briefly breaking above $105 per barrel; meanwhile, precious metals faced heavy sell-offs, with spot gold plunging over 3% on Wednesday to a more than one-month low, and spot silver dropping more than 4% at one point, hitting its lowest level in a month. ⑶ David Meger, Director of Metals Trading at High Ridge Futures, pointed out that the ongoing escalation of geopolitical conflicts is driving up energy prices, which is “adding fuel to the fire” of inflation and, in turn, strengthening expectations that the Federal Reserve may not be able to cut interest rates, keeping non-yielding gold under continued pressure. ⑷ He emphasized that the current market is not lacking in safe-haven demand, but the pressure from the repricing of inflation expectations has temporarily overshadowed gold’s safe-haven appeal. ⑸ The Iran conflict has now lasted nearly three weeks with little sign of easing, and benchmark Brent crude futures remain above $100 per barrel. As rising energy costs gradually spread to broader areas of the economy, inflationary pressures are becoming the core logic dominating asset pricing.