Gold Rebounds From Six-Month Low as Markets Monitor Iran Conflict and Fed Outlook
Gold prices moved higher on Thursday after falling to their lowest level in more than six months earlier in the session. Investors weighed escalating geopolitical tensions in the Middle East against growing expectations that the U.S. Federal Reserve may keep interest rates elevated for an extended period.
Spot gold rose 0.6% to $4,093.35 per ounce after previously dropping to $4,023.96, its weakest level since late November. Meanwhile, U.S. gold futures slipped 0.5% to $4,114.25 per ounce as traders continued to assess the outlook for monetary policy.
The precious metal had already declined more than 4% during the previous trading session.
Middle East Tensions Provide Support for Gold
Market sentiment remained focused on the escalating conflict between the United States and Iran. Overnight, U.S. forces launched another round of strikes on Iranian targets, further increasing geopolitical uncertainty.
Iran responded with attacks on U.S. military airbases in Kuwait and Bahrain and announced a halt to all vessel traffic through the Strait of Hormuz, one of the world’s most important energy shipping routes.
The developments pushed oil prices sharply higher and increased demand for traditional safe-haven assets such as gold.
According to analysts at ING, long-term support for gold continues to come from geopolitical uncertainty and ongoing central bank purchases. However, short-term price movements are expected to remain heavily influenced by economic data, Treasury yields, and expectations surrounding Federal Reserve policy.
Rising Inflation Strengthens Fed Rate Expectations
Fresh economic data released on Wednesday showed that U.S. consumer prices increased 4.2% year-over-year in May, marking the fastest pace of inflation in three years.
Higher energy costs were a major contributor to the increase, reflecting the impact of growing instability in the Middle East on global commodity markets.
The inflation report reinforced expectations that the Federal Reserve may maintain higher interest rates for longer and could even consider additional rate hikes later this year if inflationary pressures remain persistent.
Interest rate futures markets are now pricing in increasing odds of at least one Federal Reserve rate hike before the end of the year, representing a significant shift from earlier market expectations.
Strong Dollar and Higher Yields Remain Headwinds
Higher interest rates typically reduce the appeal of non-yielding assets such as gold by increasing the opportunity cost of holding bullion.
At the same time, elevated rates tend to support the U.S. dollar, making gold more expensive for international buyers. The U.S. Dollar Index remained largely unchanged during Asian trading hours but stayed close to a two-month high reached earlier this week.
Investors are now awaiting U.S. producer price data for additional clues about inflation trends and the future direction of Federal Reserve policy.
Silver, Platinum and Copper Markets Mixed
Among other precious metals, silver gained 1% to $64.01 per ounce, while platinum advanced 0.7% to $1,677.60 per ounce.
In the industrial metals market, benchmark copper futures on the London Metal Exchange fell 0.6% to $13,442.33 per ton. U.S. copper futures, however, edged 0.5% higher to $6.23 per pound.
