Gold and Silver Prices Drop 5%‑10% Amid Iran War and Inflation Fears

Gold slipped 5% to $4,654.29 an ounce and silver tumbled 10% to $72.62 an ounce on Thursday, sparking a broad sell‑off in precious‑metal stocks and ETFs as investors reacted to heightened inflation risk from the Iran war【1】.

Market reaction and drivers

The plunge coincided with a “risk‑off” mood that saw global equities and government bonds fall together. The war in Iran entered its third week, prompting concerns that disrupted energy supplies could lift inflation worldwide. Both the U.S. Federal Reserve and the Bank of Japan kept rates steady but warned that the conflict could tilt inflation higher, while European central banks were slated to announce policy decisions later that day【1】.

Higher inflation expectations have pushed real yields up, a headwind for non‑yielding assets such as gold and silver. Commodity strategist Ewa Manthey noted that the escalation in the Middle East is lifting oil prices, reinforcing expectations that central banks will stay tighter for longer, which in turn depresses precious‑metal prices【2】.

Mining stocks mirrored the metal decline. The ProShares Ultra Silver ETF fell 20% before the market opened, and the iShares Silver Trust dropped 4.4% in pre‑market trading. Individual miners like Fresnillo and Antofagasta fell 9.3% and 8.2% respectively, while the European Stoxx Europe Basic Resources index slid 6%【1】.

Broader macro context

The sell‑off follows a volatile 2026 for gold and silver after record‑breaking rallies in 2025 (gold +66%, silver +135%). Analysts point to a shift from safe‑haven buying to broader deleveraging, as investors liquidate positions to fund other assets amid tightening credit conditions【1】【2】.

CoinDesk reports that gold is now down roughly 28% from its January 2025 peak of $5,600, and silver has lost more than half its value from a near‑$120 high, as markets price in two 25‑basis‑point Fed hikes by March 2027【3】. The “debasement trade” that once buoyed metals is unraveling, reflecting renewed concerns over tighter monetary policy rather than fiscal erosion of fiat currencies.

What to watch

• Upcoming central‑bank meetings: the European Central Bank’s rate decision (expected 25‑bp hike) and the U.K. Bank of England’s policy announcement later this week.
• U.S. inflation data: any surprise in the CPI report could shift expectations for the Fed’s June meeting, where markets currently see a 98.2% chance of a hold.
• Key price levels: gold breaking below $4,500/oz and silver slipping under $70/oz would signal deeper weakness and could trigger further ETF outflows.

The sharp drop underscores how quickly geopolitical shocks can reverse the “debasement” narrative that lifted metals in 2025, leaving investors to reassess the balance between safe‑haven appeal and the cost of holding non‑yielding assets in a tightening monetary environment.