Gold Retreats

Gold prices fell below $4,100 per ounce on Thursday, pulling back from two-week highs as escalating tensions in the Middle East lifted oil prices and fueled expectations that the US Federal Reserve could raise interest rates later this year. The Iran-backed Houthis said they had targeted two Saudi oil tankers as part of a naval blockade, raising concerns over a potential new chokepoint for global oil supplies. Meanwhile, the US carried out a 12th consecutive night of strikes on Iran, prompting further retaliation and intensifying fears of prolonged disruptions to Gulf energy exports. Higher oil prices have reinforced inflation concerns, leading investors to expect the Fed to keep monetary policy tighter for longer, a backdrop that typically weighs on non-yielding assets such as gold. Money markets are currently pricing in roughly a 78% probability of a Fed rate hike in September.

Gold fell below $4,100 per ounce on Thursday, easing from a two-week high, as escalating Middle East tensions pushed oil prices higher. Iran-backed Houthi militants claimed attacks on two Saudi oil tankers in the Red Sea, raising risks of broader energy supply disruptions, while President Trump warned of strikes on Iranian infrastructure if shipping through the Strait of Hormuz is targeted. The developments pushed crude prices to fresh six-week highs, keeping inflation pressures elevated and reinforcing expectations that interest rates could stay higher for longer. Investors now looked ahead to next week’s Federal Reserve meeting, where policymakers are expected to keep rates unchanged. Still, markets continue to price in the possibility of a rate hike later this year, with traders assigning a 61% probability of an increase in September. Elsewhere, the ECB is widely expected to hold rates steady but keep the door open to a potential September hike.

Gold climbed to $4,150 an ounce on Wednesday, touching its highest level since July 7, supported by safe-haven demand and technical buying as investors monitored escalating Middle East tensions and awaited next week's Federal Reserve meeting for clues on the US interest rate outlook. Geopolitical risks intensified after President Donald Trump warned of further strikes on Iran and pledged retaliation if Iran-backed Houthi rebels disrupt shipping through the Red Sea. Meanwhile, Secretary of State Marco Rubio said the US remains open to a deal with Iran but questioned whether Tehran is willing to reach acceptable terms. Still, gold remained below the record highs reached in January, as elevated oil prices have fueled inflation concerns and strengthened expectations that interest rates will stay higher for longer. Markets continue to price in two 25-basis-point rate hikes by March 2027, with a 70% chance of the first increase coming as early as September.