The value of gold is rapidly falling. What does this mean?

The material is not an investment recommendation.

The price of gold has dropped by almost a third from the record high recorded in January. The decline continues throughout the conflict in the Middle East, which has increased investor concerns about uncertainty in the global economy. High inflation expectations increased the fall in precious metal quotations. The reason for the fall and whether gold will retain its attractiveness is in the Izvestia article.

The influence of geopolitics

• On June 10, the price of gold on the world market immediately fell by 2.18% per day. The price of spot gold decreased to $4,172.44 per troy ounce, while metal futures for August delivery fell to $4,195.6. Gold fell below the minimum values for 2026 recorded on March 23, and lost 32% of its peak value at the end of January. Currently, the precious metal is trading at the level of November 26, when it was on an uptrend to a historical record.

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• The steady decline in the value of gold coincides with the beginning of hostilities between the United States and Israel against Iran. At that time, the price of a troy ounce was $5,387.37 and has since dropped by 29%. Other valuable metals such as silver, platinum and palladium are following a similar trend.

Response to the crisis

• The latest sharp decline in gold was caused by a new exchange of blows between the United States and Iran over the downing of an American helicopter, which further undermined investors' hopes for a peaceful settlement, which the administration of US President Donald Trump is trying to promote. Investors fear that this episode will further sabotage the negotiation process and increase geopolitical tensions so much that the end of the conflict will cease to be seen in the near future. So far, both sides are talking about their intention to observe a fragile truce, but it is not certain.

• In general, the conflict in the Middle East turned out to be a difficult period for gold, which did not prove itself as a protective asset in case of geopolitical shocks. The energy crisis caused by the closure of the Strait of Hormuz has led to an unprecedented increase in oil prices. Expensive oil has caused the risk of a new inflationary wave that will slow down economic growth worldwide for a long time. Gold used to protect investors in the event of short-term spikes in inflation, but when it threatens to drag on, this asset loses its appeal.

• With high inflation looming, the US Federal Reserve and other leading central banks are expected to move to tighten monetary policy and launch a cycle of high interest rates. Already, a rate hike is estimated by the market with a probability of 70%, and the recent employment report in the United States has eliminated the possibility of rate easing. In such circumstances, it will be more profitable for investors to hold government bonds than gold, which does not bring a steady income.

• So far, gold remains well above the levels of a year ago, showing a 24 percent return compared to June 2025. This fuels interest in its sale, as it allows you to lock in the income generated by last year's rally. In the short term, this leads to a further drop in value.

Is gold still an attractive asset?

• At the current stage of geopolitical uncertainty, it is quite difficult to assess the prospects of gold as a defensive asset. The situation with the Strait of Hormuz is not only far from being resolved, but it also threatens to have long-term consequences for the global economy, even if the United States and Iran sign a peace treaty right now that will allow shipping to resume. Investment activity naturally decreases against this background, and the volatility of all assets increases. In a situation where good news is not expected from the economy, any asset can both please and disappoint an investor.

• Nevertheless, in the longer term, the arguments in favor of gold continue to work. It remains attractive to buy from central banks, which prefer it to the more unpredictable dollar. There is no reversal in this trend, and the current US administration is only fueling it. Gold is a natural substitute for foreign exchange reserves, and therefore interest in it will not cool down.

• The build-up of government debt, which is handled by almost all central banks in developed countries, also supports gold. To deal with excessive debt, governments traditionally weaken their currencies, allowing them to pay interest at lower rates. In this case, it is advantageous for investors to protect themselves with gold, which remains almost the only asset recognized by all in an increasingly less globalized world.

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• The sustainability of gold is affected by the emergence of a number of alternatives. Cryptocurrencies, short-term bonds, commodity assets, and currencies of developing countries have undermined the monopoly of gold as a protective asset. Investors have become more creative in trying to save capital in a changing world. But this does not mean that gold disappears from the list of interests, just that its share is decreasing, which leads to some reassessment, coinciding with the conflict in the Middle East. Gold is no longer a 100% protection against inflation, but it has not yet lost its place in the investor's basket.

What does this mean?

The fall in the value of gold is a natural reaction to the ongoing fighting in Iran and the Persian Gulf countries. Investors are not hoping that the situation will be resolved soon, and are adjusting to the new economic realities, in which any asset becomes more volatile. At the same time, the fundamental drivers of gold's growth remain, and in the long term, the current decline can be recouped.