Gold fell on Thursday and hovered near its lowest level in a week, as the escalating conflict between the United States and Iran pushed oil prices higher, adding to concerns about persistent inflation and the prospect of US interest rates staying elevated longer than expected.
Spot gold was down 0.4 per cent to $4,060.46 per ounce as of 0343 GMT, after touching its weakest point since the start of July in the previous session. US gold futures for August delivery slipped 0.3 per cent to $4,069.80.
Kalvin Wong, senior market analyst at Oanda, said the main weight on gold was a reassessment of when the Federal Reserve might next move on rates. “The key driver behind this downward trend for gold is the repricing of the likelihood of a second US rate hike in the first quarter of next year,” he said.
Wong added that the temporary ceasefire between Washington and Tehran had been put under strain. “After yesterday’s exchange of strikes, the interim ceasefire between the US and Iran is now fragile, so things may become volatile again,” he said.
Markets are now pricing in a 68 per cent probability of a US rate increase in September and an 87 per cent chance of one in January 2027, according to CME Group’s FedWatch tool. While gold is widely seen as a hedge against inflation, higher interest rates tend to weigh on the metal because it generates no yield.
The US military confirmed on Wednesday it had launched new strikes against Iran to keep the Strait of Hormuz open to shipping. Iran responded with attacks on Kuwait and Bahrain, in the latest escalation that has strained ceasefire efforts.
Among other precious metals, silver fell 0.9 per cent to $57.77 per ounce. Platinum rose 0.8 per cent to $1,591.13, and palladium gained 0.8 per cent to $1,223.95.
