Gold and silver retreat after initial Iran-related increases, yet regional trade is affected by the conflict as investors anticipate a brief war – Heraeus

Impact of Middle East Conflict on Precious Metals

Gold and silver prices, which initially surged following the escalation of tensions in Iran, have since retreated. According to analysts from Heraeus, the ongoing conflict is influencing the global precious metals market in tangible ways, even as Treasury yields suggest that investors anticipate a brief duration for the hostilities.

Gold’s Safe-Haven Appeal Fades

Heraeus analysts observed that the early boost to gold as a refuge asset has dissipated. The price of gold remains under pressure after its rapid climb to record highs, with geopolitical-driven buying now counterbalanced by investors taking profits and reassessing future prospects.

Market reactions to the Middle East conflict have been less dramatic than expected, possibly reflecting a belief that the situation will be resolved quickly. For example, after the Russia-Ukraine conflict began in 2022, gold prices rose for two weeks but eventually returned to previous levels, ending the year largely unchanged.

Inflation and Currency Movements

Heraeus predicts that rising energy costs will fuel inflation, yet Treasury yields have only increased by about 20 basis points. The US dollar has strengthened, with the dollar index moving from 97.6 before the conflict to 99, still below its January peak of 110. Several factors could challenge gold, such as a stronger dollar and the possibility of higher inflation prompting fewer rate cuts or even rate hikes. However, these effects may be short-lived if the conflict ends soon.

Disruptions in Precious Metals Trade

The conflict has also disrupted the precious metals trade in the Middle East. Dubai, a major gold trading center that imports gold for refining and exports significant quantities—especially to India—has seen its trade halted. Gold is typically transported on commercial flights, but thousands of these flights have been cancelled due to the conflict.

On Monday morning, gold prices were trading near the middle of their daily range after a sharp overnight decline.

Spot gold was last quoted at $5,079.63 per ounce, marking a 1.78% drop for the session.

Silver Market Developments

Turning to silver, Heraeus analysts highlighted that Fresnillo, the world’s largest primary silver producer, expects a decrease in output moving forward. In 2025, silver production reached 48.7 million ounces, matching forecasts but down 13.5% from 56.3 million ounces in 2024. While improvements were seen at the Saucito mine and increased production at Juanicipio and San Julián Veins, overall output fell due to lower volumes and ore grades. Fresnillo anticipates producing between 42.0 and 46.5 million ounces this year, as changes to mine plans and a shift to high-grade gold areas with lower silver content at Ciénega reduce throughput and grades.

All Fresnillo mines are located in Mexico, the world’s top silver producer. Preliminary government data indicates that national silver production rose by about 3% last year, despite Fresnillo’s decline.

Silver prices initially climbed in response to the Middle East conflict but, like gold, have since pulled back from record highs. The rally prompted investors to reduce their exposure and take profits, leading to a drop in ETF holdings. The price has fallen below its corrective channel, suggesting further declines may be ahead. Initial support is seen at $78 per ounce, with another level at $64 per ounce, the low from early February.

Silver prices have recovered most of their overnight losses and are trading close to session highs on Monday morning, though they remain in negative territory.

The latest spot silver price was $83.750 per ounce, down 0.83% for the day.