A worker is shaping a copper rod sourced from recycled materials at a metal melting facility in Yuexi County, located in central China’s Anhui Province, on July 11, 2025.
On Thursday, the prices of metals took a significant hit as investors expressed concerns about the global economic fallout from escalating oil prices resulting from the U.S.-Iran conflict.
Gold saw a drop of almost 6%, while silver fell by about 8%. The downturn isn’t confined to these metals; copper and palladium also faced pressure, decreasing by 2% and 5.5%, respectively.
The sell-off escalated on Thursday, with both gold and silver underperforming since the onset of the conflict, despite being regarded as safe-haven assets. The spike in oil prices has fueled fears of renewed inflation and prolonged high-interest rates, which make non-yielding assets like bullion less appealing.
As interest rates rise, metals are becoming more affordable, further putting downward pressure on gold.
“The Fed’s anticipated rate cuts have reduced inflation fears, and global rising interest rates are affecting gold prices,” said Peter Boockvar, chief investment officer at One Point BFG Wealth Partners. The yield on U.S. 10-year government bonds surged past 4.3% at one point on Thursday.
In contrast, copper and palladium had been relatively stable after their initial declines at the war’s start, though growth concerns have recently started to impact these industrial metals.
Recession Risk
Industrial metals like copper are widely used—from electronics to plumbing. When copper prices fall, it often signals a slowdown in economic growth.
Wall Street’s consensus appears to lean toward the idea that the prolonged conflict could keep oil prices elevated, altering consumer and business spending habits, which might lead to a recession.
Traders are discussing what’s termed the “demand destruction” phase triggered by the energy crisis.
Concern about recession risks is mounting among investors, according to Boockvar.
The potential for slowing growth coupled with rising inflation creates a “stagflation” situation. However, while some traders are beginning to adjust for this, others consider the likelihood of such a scenario to be low.
“Historical oil shocks are not expected to instigate the same level of sustained stagflation observed in the past, especially during the 1970s,” commented Ed Yardeni, president of Yardeni Research. He noted that the oil crisis and inflation triggered by Russia’s invasion of Ukraine in 2022 did not result in a recession.
This sentiment has been echoed by Federal Reserve Chairman Jay Powell, who stated during a press conference, “I’d prefer to reserve the term stagflation for more critical situations.”
Boockvar believes that stability in industrial metal prices hinges on the war’s resolution, although he anticipates gold might rebound as attention turns to mounting national debts and deficits, especially given that gold has historically performed well in such situations. He pointed out that military expenditures related to wars could worsen these deficits further.
Even if stagflation does occur, Christian Muller-Grissmann, head of asset allocation research at Goldman Sachs, remarked that gold remains a valuable asset in such economic landscapes.
“Should stagflation become prolonged, we predict that demand for real assets like gold and currency diversification will strengthen, particularly if real yields continue to fall,” he stated.
