Gold Falls Hardest Since 2013 Crash as Iran War's Inflation Shock Sends Borrowing Costs Soaring

Gold suffered its steepest weekly drop since the 2013 crash, falling 9.5% to around $1,560/oz amid surging borrowing costs triggered by an inflation shock from the escalating Iran conflict. Oil prices hovered near $100/barrel, driven by geopolitical supply constraints including Iran's exorbitant tanker fees and long LNG repair timelines in Qatar. This energy crisis has spooked markets globally, pushing 10-year US Treasury yields back to last July's highs, German Bund yields to levels unseen since 2011, and UK Gilt yields to 2008 peaks. The International Energy Agency framed this shock as the worst global energy security threat ever, far surpassing the 1970s or the post-Ukraine invasion gas shock. As a result, Fed Funds futures now assign a 33% chance of a Fed rate hike before year-end, a drastic shift from zero probability just days ago. Ten-year TIPs real yields jumped to nearly 2%, implying significantly tighter real monetary conditions. Copper plunged 6.7%, heading for its worst weekly drop since mid-2025, while major bullion ETFs including GLD and IAU posted multi-week outflows, reflecting reduced investor appetite for precious metals as a safe haven. The sharp fall in gold and silver amidst rising real rates and inflation pressures signals a critical rotation in traders' expectations: central banks are poised to hike rather than cut rates in response to energy-led inflation, undermining the case for gold as a hedge. Near term, further increases in global borrowing costs and worsening energy supply risks could continue to pressure gold and industrial metals alike, with the Iran conflict and energy market disruptions key to watch as catalysts. A sustained high real yield environment would cap bullion's upside until inflation dynamics or geopolitical risks shift materially.