Gold Hits 3-Week High on Dovish Fed Bets

Gold prices rose to around $4,700 per ounce on Wednesday amid signs of de-escalation in Middle East tensions, which could lead to lower oil prices and ease concerns over further central bank rate hikes. President Donald Trump told aides he is willing to end the war against Iran even if the Strait of Hormuz remains largely closed, while regional reports suggested Iran’s President Masoud Pezeshkian may consider ending the conflict under certain conditions. Still, gains in bullion remained limited as easing geopolitical risks reduced safe-haven demand, while a firm US dollar and elevated Treasury yields continued to weigh on non-yielding assets. In March, gold plunged more than 13%, marking its steepest monthly drop since October 2008, and remains nearly 19% below its record highs set in late January. Traders are now closely watching upcoming US economic data and signals from the Federal Reserve for further direction on interest rate expectations.

Gold climbed above $4,570 per ounce on Tuesday, finding support at lower price levels, but remained on course for its largest monthly decline in over 17 years. The precious metal has plunged more than 13% in March, its steepest drop since October 2008, and sits nearly 19% below record highs set in late January. The selloff reflects a massive shift in investor sentiment, as the escalating Middle East war has fueled inflation fears and prompted a hawkish monetary policy outlook. With Iran effectively blocking the Strait of Hormuz, the conflict has driven oil prices higher, reinforcing expectations of tighter monetary policy. Traders have completely priced out the prospect of US rate cuts in 2026, a stark reversal from pre-war expectations of two cuts, despite Fed Chair Jerome Powell’s insistence that long-term inflation expectations remain stable. As a result, investors have fled to the US dollar as the preferred safe haven, exerting relentless pressure on gold.

Gold rose toward $4,600 per ounce on Tuesday as oil prices eased, but was still poised for around a 13% drop in March for its worst monthly performance since October 2008. The precious metal faced sustained pressure this month from an oil-driven inflation shock that pushed investors and policymakers toward a more hawkish stance on interest rates. The Middle East conflict has now entered its fifth week with no signs of easing, as Iran has effectively shut off the Strait of Hormuz and threatened to disrupt Red Sea shipping as well. Meanwhile, Federal Reserve Chair Jerome Powell said long-term US inflation expectations appeared to remain anchored despite heightened uncertainties tied to the conflict. He added that the central bank’s policy stance is well positioned to allow officials to assess the economic impact of the Iran war.