The escalation of tensions between the US and Iran triggers concerns about inflation, causing gold to plunge by 4% at one point, almost erasing its annual gains.

As the Middle East war enters its fourth week, both the US and Iran threaten each other to launch a new round of attacks, causing a sharp decline in gold prices, nearly wiping out the year's gains. The price of gold plummeted by 3.8% at one point, approaching $4320.30 per ounce, just slightly higher than the closing level at the end of last year. Since the conflict broke out, the surge in oil prices has exacerbated inflation risks and weakened the prospect of recent interest rate cuts by the Federal Reserve and other central banks. This poses a headwind against non-interest-bearing gold, with the price of gold falling for eight consecutive trading days and just setting the largest weekly drop since 1983. The opening trend of gold fluctuated, consistent with the overall market performance. After a brief slight rise, crude oil prices fell, and the stock market also experienced extreme volatility. In the three weeks since the outbreak of the war on February 28, part of the decline in gold prices was due to forced selling by investors to offset losses in other assets in their portfolio. Gold closed at $4319.37 per ounce at the end of last year. Last weekend, US President Donald Trump issued a two-day ultimatum to Iran, demanding the reopening of the Strait of Hormuz, or else its power plants would be bombed. Iran responded by stating that if its power facilities were attacked, it would "completely" block this strategic waterway and target energy, information technology, and desalination infrastructure. Trump's ultimatum was issued at 7:44 pm New York time on Saturday. Analyst Kyle Rada of Capital.com said that due to technical factors, "gold is expected to rebound in the short term." He believes that this will largely depend on "whether Trump follows through on his threat to attack Iran's power plants." An indicator of momentum, the 14-day relative strength index of gold price, further dropped below the 30 mark, with some traders viewing this as an oversold signal. US government data released last Friday showed that as of March 17, hedge funds and other large speculators raised their net long positions in gold to the highest level in seven weeks. As of the time of writing, spot gold fell by 1.69% to $4415 per ounce. Silver fell by 1.38% to $66.86. Platinum and palladium also declined. The Bloomberg Dollar Spot Index, which measures the US dollar exchange rate, rose by 0.1%.