Gold Rises with Eyes on Fed Meeting

Gold rose back above $5,160 per ounce on Wednesday, recovering some losses from the previous session, as investors tracked developments in the Middle East. The US-Israeli conflict with Iran entered its fifth day, with Israel striking a building where clerics were meeting to select a new Supreme Leader on Tuesday. US President Donald Trump voiced concern that the attacks could bring a new Iranian leadership as troubling as the previous regime, underscoring the conflict’s uncertain trajectory. Trump also pledged naval escorts and insurance support for oil tankers and other vessels through the Strait of Hormuz to ease market fears. Gold and other metals had tumbled on Tuesday as the dollar strengthened on worries that rising energy costs could drive inflation, prompting investors to reassess the Federal Reserve’s policy path.

Gold slipped nearly 5% to around $5,050 per ounce on Tuesday, as investors increasingly favored the US dollar over bullion as a safe haven amid escalating geopolitical tensions. The USD strengthened as investors sought shelter amid soaring energy prices linked to the Middle East conflict. Rising fuel costs added to inflation worries, pushing bond yields higher and prompting markets to reassess the Federal Reserve’s policy trajectory. Expectations for the next Fed rate cut have moved from July to September, though two 25-basis-point reductions remain priced in. Meanwhile, the US military is expected to intensify operations against Iran, potentially targeting missile production sites, drones, and naval assets. A senior Iranian official also warned that vessels attempting to transit the Strait of Hormuz could be targeted, effectively stalling tanker traffic amid heightened security risks.

Gold fell below $5,300 per ounce on Tuesday, giving up earlier gains, pressured by a stronger US dollar and rising Treasury yields. With Middle East tensions driving oil prices higher, this heightened concerns over US inflation, prompting traders to reduce bets of further Federal Reserve rate cuts. Adding to inflation concerns, ISM manufacturing input prices for February surged to the highest level since mid-2022. Markets now see the next Fed rate cut likely around September, later than previously anticipated. Meanwhile, President Trump warned on Monday that the US would continue attacking Iran until it was no longer capable of posing a threat, signaling that the conflict could last for a month or “far longer.” At the same time, Iran declared the Strait of Hormuz closed and threatened to target any vessels attempting to transit the critical energy corridor.