Gold Near Eight-Month Low as Oil Rally Lifts Rate Hike Bets

Gold prices fell toward $4,000 an ounce on Thursday, approaching their lowest level since November 2025, as escalating tensions in the Middle East drove oil prices higher and reinforced concerns that interest rates could remain elevated. The latest escalation followed fresh US strikes on Iranian military targets and Tehran's retaliation against US bases in neighboring countries, raising concerns over the security of the Strait of Hormuz and pushing crude oil prices to one-month highs. Higher energy prices have strengthened expectations that the Federal Reserve may need to keep monetary policy tighter for longer, reducing the appeal of non-yielding gold. Traders currently see about a 51% chance of a September rate hike. Meanwhile, softer-than-expected US inflation data released this week has largely ruled out a July increase, even as Fed Chair Kevin Warsh reaffirmed his commitment to bringing inflation under control.

Gold fell toward $4,000 an ounce on Thursday, resuming its decline as escalating attacks in the Middle East pushed oil prices sharply higher this week, reviving concerns about inflation and the outlook for interest rates. The US carried out additional strikes against Iranian targets on Wednesday, though President Donald Trump said Tehran had signaled a willingness to resume negotiations. Meanwhile, the precious metal found some support from softer US inflation data, which eased concerns over a near-term Federal Reserve rate hike. Data released on Wednesday showed US producer prices unexpectedly declined in June for the first time in nearly a year, largely due to lower energy costs, following Tuesday’s weaker-than-expected consumer inflation report. However, June’s inflation figures did not reflect the impact of the latest escalation in the US-Iran conflict, as the interim peace agreement reached last month has effectively unraveled.

Gold steadied around $4,050 an ounce on Thursday, trading in a narrow range for a second straight session as investors evaluated the Federal Reserve's policy outlook following softer US inflation data and escalating conflict in the Middle East. Data released on Wednesday showed US producer prices unexpectedly fell in June for the first time in nearly a year, driven by lower energy costs, while core PPI rose a softer-than-expected 0.2%. The report followed Tuesday’s weaker consumer inflation data, reducing concerns that the Fed would soon raise interest rates. Markets also scaled back expectations for a Fed rate hike in September, with the implied probability falling to around 44% from 50% a day earlier. Still, June’s inflation data did not capture the impact of the latest escalation in hostilities between the US and Iran, as the interim peace agreement reached last month has effectively unraveled.