Gold prices posted modest gains in Asian trading on Thursday but stayed well under key levels as investors weighed uncertainty surrounding interest rates and the possible inflationary fallout from the U.S.–Israel conflict with Iran.
Stronger-than-expected U.S. producer price data, along with warnings from the Federal Reserve about rising inflation risks, pressured bullion on Wednesday. Prices fell sharply, slipping far below the closely watched $5,000-per-ounce mark and hitting their lowest level in more than a month.
By 01:47 ET (05:47 GMT), spot gold was up 0.2% at $4,833.60 per ounce, while gold futures were down 1.3% at $4,834.04 per ounce.
Gold drops below $5,000/oz after U.S. inflation data and Fed remarks
Gold moved out of the $5,000–$5,200 per ounce range that had held for almost a month after the Federal Reserve opted to keep interest rates unchanged on Wednesday and pointed to uncertainty over how the Iran conflict could influence inflation.
The policy decision came shortly after the release of February’s producer price index, which showed stronger price pressures than economists had anticipated.
Together, the PPI data and the Fed’s comments have clouded the outlook for U.S. monetary policy. Market expectations now suggest that the central bank has little room to cut interest rates in the near term. According to CME FedWatch data, investors do not expect a rate cut until at least September.
This outlook has weighed on gold prices, offsetting much of the safe-haven buying triggered by the conflict in the Middle East. The precious metal has struggled to regain momentum since the start of the Iran war.
“The market is effectively trading less on geopolitical hedging demand and more on the worries of higher inflation risks delaying Fed cut trajectory,” OCBC analysts wrote in a note.
“While safe-haven flows may still offer intermittent support, they are being offset by the drag from rising real yields.”
Other precious metals also weakened on Thursday, extending declines from the previous session. Spot platinum slipped 0.6% to $2,012.68 per ounce, while spot silver fell 0.7% to $74.8325 per ounce.
Like gold, both metals have largely lagged the broader market since late February.
Rising oil prices add pressure despite geopolitical tensions
Gold has underperformed this week even as oil prices continued to climb amid the escalating U.S.–Israel conflict with Iran.
The situation intensified on Wednesday after Israel struck the South Pars gas field — the largest gas field in the world — triggering a strong response from Iran. Tehran retaliated by attacking several key energy facilities across the Middle East and continuing strikes on targets in Israel.
The inflationary implications of the conflict have become a major concern for investors and a key factor weighing on gold. Global oil and gas prices have surged as Iran kept the Strait of Hormuz closed, while energy production in parts of the Middle East has slowed due to military activity and shipping disruptions.
These developments have raised fears of higher inflation and a more hawkish stance from central banks worldwide — conditions that typically dampen demand for gold.
“Unless there is a meaningful shift lower in USD, real yields or a clear re-pricing back towards Fed easing, gold may struggle to sustain upside momentum,” OCBC analysts said.
In addition to the Federal Reserve, several other major central banks are due to announce interest rate decisions on Thursday. The Bank of Japan has already kept its policy unchanged, while the European Central Bank, the Bank of England and the Swiss National Bank are scheduled to release their decisions later in the day.
Leave a Reply