Gold fell to its lowest level since 26 March on Thursday, dropping 1.5% to $4,388.76 per ounce by 07:40 GMT as renewed US-Iran military exchanges drove the dollar higher and sent oil prices up more than 3%. US gold futures for June delivery fell 1.4% to $4,386.
The dollar climbed to a one-week high, making gold more expensive for holders of other currencies and adding to selling pressure across precious metals.
The escalation followed US airstrikes on an Iranian drone operation near the Strait of Hormuz. An unnamed American official told Reuters the military shot down four Iranian attack drones and struck a ground control facility in the coastal city of Bandar Abbas that was preparing to launch a fifth. Iran’s Revolutionary Guard said it responded by targeting the American air base it believed launched the strike, without naming the facility. Iran’s Tasnim news agency reported the Guard’s account of the retaliatory attack.
The flare-up came hours after President Donald Trump denied an Iranian report claiming a deal had been reached to reopen the strategic waterway.
Matt Simpson, senior analyst at StoneX, said geopolitical risk remains elevated and that repeated false signals around peace talks have reinforced appetite for the dollar. “Geopolitical disruptions are still escalating, and we’ve had many false alarms on peace deal negotiations,” he said. “So I think the bid in the dollar will continue, and that means gold will likely remain under pressure.”
The logic behind gold’s decline despite a tense backdrop is straightforward: rising oil prices threaten to accelerate inflation and keep interest rates higher for longer. Gold typically acts as an inflation hedge, but elevated rates reduce the appeal of a non-yielding asset. Federal Reserve Governor Lisa Cook said on Wednesday she favoured holding short-term rates steady for now, but signalled openness to raising them if tariffs, the Iran conflict, and AI-driven investment continue pushing prices up.
Investors are watching US personal consumption expenditure data due later Thursday for further clues on the Fed’s path.
Other precious metals followed gold lower. Spot silver fell 1.7% to $73.36 per ounce, platinum dropped 1.1% to $1,897.80, and palladium slid 1.2% to $1,373.58. Both silver and platinum earlier touched their lowest levels in close to a month.
