Federal Reserve Inflation Warning Crushes Precious Metals: Gold Nearly Falls Below $4,800, Silver Falls for Sixth Consecutive Day

Tongtong Finance APP notes that due to the escalation of the Iran conflict causing a surge in crude oil prices, silver has recorded its sixth consecutive day of decline, while gold prices stabilized after plunging nearly 4% in the previous trading day. The Federal Reserve previously warned that the Middle East war and rising energy prices pose inflation risks.

In after-hours trading, gold and silver are respectively quoted at $4,823.90 and $75.42 per ounce.

The Federal Reserve announced that interest rates will remain unchanged within the 3.5%-3.75% range (as expected). Fed Chair Jerome Powell stated that maintaining interest rates at a mildly restrictive level is crucial. The Fed added a new sentence to its policy guidance, noting that the impact of the Middle East conflict on the economy is “uncertain.”

On Wednesday, after an investigation by the Department of Justice, Powell made a rare statement about his future at the Fed. He said he has no intention of resigning from his position until the investigation concludes.

Powell stated that if his successor is not confirmed before the end of his term in May, he will serve as interim chair—a temporary position granted when the chairmanship is vacant. The Department of Justice investigation has raised concerns about political interference in the Federal Reserve, undermining market confidence in U.S. assets and supporting gold prices.

Oil supply shocks intensify inflation concerns, putting pressure on gold

Due to the escalation of the Iran conflict leading to soaring energy prices, coupled with the U.S. Producer Price Index (PPI) rising 0.7% month-over-month in February—above expectations—precious metals had previously fallen sharply. This has increased speculation that the Fed may delay rate cuts this year.

Developments in the Middle East that day—including an attack on Iran’s massive South Pars gas field and Iran’s subsequent attack on the world’s largest liquefied natural gas (LNG) plant in Qatar—led to a broad sell-off of risk assets, including stocks, forcing some investors to sell gold holdings for cash.

Ewa Mansi, a commodities strategist at ING, stated in a report that the plunge in precious metals “looks like a cross-asset repositioning.” She pointed out, “Crude oil is reacting to supply risks, and the decline in gold may be due to profit-taking and broad liquidation amid risk asset sell-offs, a strengthening dollar, and rising real yields.”