Gold Dips as Middle East Tensions Lift Oil, Weigh on Rate-Cut Bets

Gold held below $4,100 an ounce on Thursday, hovering at its lowest levels since November last year as the US launched strikes against Iran for the second day, threatening to prolong the conflict that has rattled global markets and fueled inflation concerns. The attacks followed President Donald Trump's accusation that Iran was delaying negotiations over an interim peace agreement, while Tehran vowed to resist any threats. The protracted conflict and the ongoing near-total closure of the Strait of Hormuz disrupted energy flows from the Persian Gulf, raising concerns about resurgent inflation and potential central bank interest rate hikes. Meanwhile, US inflation accelerated in May to its fastest pace in more than three years, driven by surging energy costs, though the figure matched market expectations. Traders modestly pared expectations for Federal Reserve rate hikes this year, although a quarter-point increase in December remains fully priced.

Gold prices extended their decline toward $4,100 per ounce on Wednesday, reaching levels last seen in late November 2025, as US inflation data largely matched expectations and the Iran conflict intensified. Headline inflation rose to 4.2% in May, its highest since April 2023, fueled by soaring energy costs tied to the Iran conflict, while the core rate climbed to a seven-month high of 2.9%. Traders slightly scaled back expectations for Federal Reserve rate hikes this year, though a quarter-point increase in December remains fully priced in after stronger-than-expected US employment data last week. Meanwhile, Middle East tensions escalated as the US and Iran exchanged fresh strikes, with President Donald Trump stating that Iran will "have to pay the price" for delaying negotiations, undermining a fragile ceasefire and dimming prospects for a broader peace agreement.

Gold dropped toward $4,200 an ounce on Wednesday, falling to its lowest level since March 23 after the US launched new strikes against Iran following the downing of an American helicopter, driving oil prices higher and fueling inflation concerns. The latest escalation has cast doubt on the durability of a fragile ceasefire and the prospects for a broader peace agreement, while extending the near-complete closure of the Strait of Hormuz. Rising energy costs linked to the conflict have heightened fears of persistent inflation and the possibility of further central bank tightening, weighing on non-yielding assets such as gold. Meanwhile, investors looked ahead to the release of US inflation figures for fresh clues on the Federal Reserve’s policy path. Stronger-than-expected US employment data also strengthened expectations that the Fed could raise interest rates before the end of the year.