Gold Prices Plunge Amid Iran Tensions: What This Means for Investors and Businesses in Oman
Gold prices are plunging deeper into bear market territory, primarily due to leverage effects and rising government bond yields. However, a swift recovery is expected if tensions surrounding the Iran conflict ease.
Nigel Green, CEO of the deVere Group—one of the world’s largest independent financial advisory firms—provides insight into the sharp sell-off. Since peaking above $5,500 in late January, gold has fallen by more than 20%, marking one of the steepest weekly declines seen in over a decade.
Green attributes much of this decline to leveraged positions: “Investors who entered large gold positions using borrowed funds are being forced to liquidate as market volatility spikes, accelerating the downward momentum.” Margin calls are compelling traders to sell gold holdings to raise cash, with gold serving as an obvious liquidity source amid turbulent markets.
Currency and bond market dynamics are adding further pressure. The US dollar index has strengthened recently, while benchmark yields in the US and UK have risen, increasing the opportunity cost of holding non-yielding assets like gold.
“Rising yields in the US and UK are crucial,” Green explains. “Government bonds now offer more attractive returns, reducing gold’s appeal, especially in the short term. A stronger dollar compounds this issue since gold is priced in dollars, making it more expensive for international buyers and suppressing demand.”
Currently, ten-year US Treasury yields hover around mid-4%, with UK gilt yields remaining high due to persistent inflation. Expectations for aggressive interest rate cuts have diminished, keeping yields elevated.
“The market is reassessing monetary easing prospects,” says Green. “Persistent inflation keeps yields high, and gold, which pays no income, reacts quickly to these shifts.”
Despite the significant pullback, Green insists the move reflects short-term positioning rather than a fundamental drop in demand. Structural factors driving gold’s rally—such as sovereign reserve accumulation, geopolitical risks, and fiscal concerns—remain intact.
Central banks continue to be major buyers, with official sector purchases exceeding 1,000 tonnes annually for several years. Institutions like China’s People’s Bank are leading these acquisitions as part of broader diversification efforts away from the US dollar.
“Central banks are still accumulating gold at a historically strong pace as a strategic, long-term move to strengthen reserves and reduce currency volatility exposure,” Green notes. “Sovereign demand provides a solid floor beneath the market, limiting downside risk and setting the stage for sharp rebounds when short-term pressures ease.”
Geopolitics remains the primary catalyst for future gold movements. Initially, gold surged on safe-haven demand following tensions involving Iran but later retraced as investors shifted towards liquidity and yield-producing assets.
Green observes, “This pattern is typical—gold attracts inflows early in crises, then investors pull back to manage liquidity and risk.”
Any credible signs of de-escalation in Iran could rapidly change market dynamics, prompting sidelined or redirected capital to flow back into gold.
In conclusion, Green describes the current scenario as a “leverage-driven washout colliding with higher yields,” causing temporary forced selling pressure. He anticipates sentiment shifts related to Iran would trigger a swift and strong rebound in gold prices.
Special Analysis by Omanet | Navigate Oman’s Market
The sharp sell-off in gold prices, driven by leverage unwinding and rising government bond yields, signals a temporary but strategic market correction amid geopolitical volatility. For businesses and investors in Oman, this creates an opportunity to monitor geopolitical developments closely, particularly in Iran, as any de-escalation could trigger a rapid rebound in gold prices. Savvy investors should consider positioning for volatility and long-term demand supported by central bank purchases and structural shifts away from the dollar.
