There's plenty of geopolitical risk today, along with higher global inflation and larger US federal budget deficits ahead. Yet, the price of an ounce of gold is down sharply today. It fell to an intraday low of $4508 per ounce at 9:02 am EST, down from a recent closing high of $5311 on Monday, March 2, two days after the start of the current war in the Middle East (chart). This decline coincides with the escalation of the war and mounting concerns that it might not be short.
In a press briefing at the Pentagon this morning, Secretary of Defense Pete Hegseth addressed reports that the Pentagon is seeking $200 billion in additional funding for the ongoing conflict with Iran. While he did not officially "ask Congress" for that specific amount today, he confirmed that the Pentagon is seeking supplemental funds and that the $200 billion figure is a potential target. He said, "It takes money to kill bad guys." He emphasized that the funds are needed to replenish munition stockpiles and support "Operation Epic Fury."
What gives? The always-reliable quick answer is: profit-taking following a meteoric rise. Perhaps investors in the Middle East are selling gold to buy the US dollar, which has strengthened during the war, even though both are considered safe havens. Rising bond yields might also explain gold's recent meltdown. The probability of further Fed rate cuts is falling as inflation heats up.
Technically speaking, gold's price dropped below a short-term uptrend line this week (chart). The next uptrend support line could be tested closer to $4000.
