Gold drops to November lows as rate fears outweigh Iran conflict
Gold prices have plummeted to eight-month lows as surging oil prices from the US-Iran conflict fuel market expectations of a Federal Reserve rate hike.
August gold futures opened at $3,980.10 per troy ounce on Friday, July 17, down 0.3% from Thursday’s close and falling to levels not seen since November 2025. The metal briefly edged up to $3,998.10 in early trading but remains under severe pressure.
A sixth consecutive day of US airstrikes against Iranian targets is failing to lift the safe-haven asset. The bombardment has escalated this week to target critical infrastructure like roads and bridges alongside military sites. However, Iran is refusing to relinquish control of the Strait of Hormuz and is retaliating with its own strikes across the Middle East.
The continued closure of the strategic waterway to oil tankers has driven crude prices sharply higher this week. This energy spike is shifting the macroeconomic calculus, with markets now pricing in at least one Federal Reserve rate hike before year-end to combat inflation. Higher interest rates increase the opportunity cost of holding non-yielding bullion, negating gold's traditional geopolitical premium.
The reversal is stark. Gold has dropped 3.4% over the past week and 8.3% over the past month. While the metal is still sitting on a 20.1% gain compared to a year ago, its momentum has collapsed from a 95.6% one-year surge recorded as recently as January 29.
The volatile environment is forcing investors to weigh optimal portfolio allocations. Brett Elliott, director of content and SEO at American Precious Metals Exchange, suggests income investors stick to a 2% to 5% allocation since gold provides no yield, while growth-oriented investors might tolerate 10% to 15%.
Blake McLaughlin, executive vice president at Axcap Ventures, advocates for a 5% to 8% position. "Gold may not offer the outsized return potential of private investments, but the metal holds a set of attributes that are increasingly hard to ignore," he said, citing its resilience during geopolitical unrest.
Thomas Winmill, portfolio manager at Midas Funds, suggests a 5% to 15% allocation, specifically favoring gold mining companies. He notes that investors heavily weighted in financial assets without real estate equity might justify a higher gold weighting, while those with lower risk tolerance should scale back.
Opinions diverge significantly at the extremes. Vince Stanzione, CEO at First Information, recommends a 20% allocation in physical gold or ETFs, arguing that "gold keeps with inflation and gold retains its purchasing power" as fiat currencies devalue.
Robert R. Johnson, a professor at Creighton University's Heider College of Business, rejects the asset class entirely. "While having a small position in precious metals may dampen portfolio volatility in the short-run, the tradeoff between slightly dampened volatility and the lost long-term return is certainly not a prudent one, particularly for Gen Z/millennials with long investing time horizons," he said.
