Gold prices rose more than 1% on Thursday, recovering from a one-week low as investors returned to the precious metal after recent losses.
The rebound came as markets continued to monitor escalating tensions in the Middle East.
Spot gold climbed 1.14% to $4,123.91 an ounce. Gold futures gained 1.25% to $4,132.95 an ounce by 10:48 ET.
Fed Minutes Offer Support to Gold
Gold also received support from the minutes of the Federal Reserve’s June meeting.
The minutes showed that policymakers were divided over whether more interest rate hikes were needed. This raised expectations that borrowing costs could move lower later this year.
Lower interest rates are usually positive for gold because the metal does not pay interest. When yields fall, the opportunity cost of holding gold becomes lower.
Inflation Concerns Limit Rate Cut Hopes
However, the Fed minutes also showed that officials remain concerned about persistent inflation.
U.S. price pressures have accelerated since the U.S.-Iran conflict began in late February. Inflation remains well above the Fed’s 2% target.
This suggests policymakers may be cautious about cutting rates too quickly, especially if energy prices remain elevated.
U.S.-Iran Strikes Shake Markets
Gold had fallen for three straight sessions before Thursday’s rebound.
The recent pressure came after renewed U.S.-Iran military activity sent oil prices sharply higher. Rising energy prices increased concerns about inflation and the outlook for interest rates.
A stronger U.S. dollar also weighed on gold. The dollar index remained close to the 13-month highs reached in June and was last mostly unchanged at 100.98.
A firmer dollar can make gold more expensive for overseas buyers, reducing demand.
Energy Prices Could Keep Fed Policy Tight
ANZ analysts said that any rebound in energy prices could strengthen expectations that the Fed will keep interest rates higher for longer to fight stubborn inflation.
This remains a key issue for gold traders. Safe-haven demand is supporting the metal, but higher-for-longer interest rates could limit further gains.
Middle East Conflict Escalates
The United States launched fresh attacks on Iran on Thursday, just hours after President Donald Trump said a fragile ceasefire with Tehran was over.
Washington said the latest hostilities followed Iranian attacks on vessels trying to pass through the Strait of Hormuz.
Iran’s military responded with separate strikes on what it described as U.S. military bases in Kuwait and Bahrain.
Iran’s Islamic Revolutionary Guards Corps also warned that more attacks on American military sites in the Gulf could follow if Washington launched further strikes.
For now, gold remains supported by geopolitical uncertainty, safe-haven demand, and changing expectations around Federal Reserve policy.
