Gold prices remained under pressure on Wednesday, falling to their lowest level in six months as investors focused on the inflationary impact of renewed Middle East tensions and the possibility of tighter U.S. monetary policy.
Spot gold dropped 2% to $4,168 per ounce during morning trading, marking its weakest level since November 2025. The move followed a 1.6% decline in the previous session. August gold futures also moved lower, trading at $4,188 per ounce.
Renewed Conflict Clouds Peace Prospects
The latest military exchanges between the United States and Iran have complicated efforts to secure a lasting ceasefire in the region.
Tensions escalated after U.S. strikes targeting Iranian-linked assets, prompting a warning from Iranian Foreign Minister Abbas Araghchi, who stated that the country “will not leave any attack or threat unanswered.”
According to Iranian state media, Tehran subsequently launched a drone attack targeting the U.S. Fifth Fleet in Bahrain.
The renewed instability threatens to prolong disruptions around the Strait of Hormuz, a strategic route that plays a crucial role in global energy transportation.
Higher Energy Prices Raise Inflation Concerns
Oil prices initially climbed following the latest developments, reinforcing worries that elevated energy costs could feed into consumer inflation.
Brent crude briefly rose above $93 per barrel before easing back toward $91.50 after Washington indicated that its retaliatory military action had concluded.
The prospect of stronger inflation has increased expectations that the Federal Reserve could maintain a restrictive stance or potentially raise interest rates further.
Since gold offers no yield, higher interest rates tend to reduce its appeal relative to fixed-income investments.
Markets Await U.S. Inflation Data
Investors are closely watching the U.S. consumer price index report scheduled for release later today.
Economists surveyed by Reuters expect annual inflation to reach 4.2%, which would represent the highest reading in three years.
Core inflation, excluding food and energy, is expected to rise 0.3% on a monthly basis and 2.9% year over year.
“The detail that matters, however, is not just the aggregate number,” according to Gabriel Debach, market analyst at eToro, but “the composition of the report will be crucial: a rise mainly driven by energy would be seen as temporary, while broader pressure on core services would have much more significant implications for monetary policy.”
Technical Signals Point to Further Weakness
Gold is now trading roughly 20% below the levels seen before the outbreak of the Iran conflict in late February.
The recent fall below the 200-day moving average has attracted additional selling, as many institutional investors view this indicator as an important measure of long-term market direction.
“We expect price action to become more vulnerable in the near term,” predicts Suki Cooper, global head of commodity research at Standard Chartered Plc.
She added that if gold continues to weaken, “were to decline further, additional positions in gold-backed ETFs would become unprofitable, exposing the metal to further downside risk.”
According to Cooper, the next major support zone is located near $4,100 per ounce.
Although demand conditions in India have softened, China continues to provide support, with local premiums remaining below $10 per ounce.
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