Gold prices slipped below the $5,000-per-ounce threshold during Asian trading on Wednesday as investors grew cautious ahead of the Federal Reserve’s widely anticipated interest rate decision later in the day.
The precious metal had briefly moved back above the $5,000 level earlier in the session but reversed direction as ongoing hostilities in the conflict involving the United States, Israel and Iran kept markets concerned about the war’s potential inflationary impact.
Spot gold declined 0.4% to $4,987.09 at 01:18 ET (05:18 GMT), while gold futures dropped 0.4% to $4,990.44 per ounce.
Other precious metals also moved lower. Spot silver fell 0.3% to $79.0345 per ounce, while platinum lost 0.6% to $2,116.40 per ounce.
Safe-haven support limited despite Middle East tensions
Escalating tensions in the Middle East provided only modest support for gold, which struggled to stay above $5,000 this week even as U.S. and Israeli forces continued strikes against Iran, prompting retaliatory responses from Tehran.
The conflict showed little sign of easing after an Israeli airstrike earlier in the week killed Iranian security chief Ali Larijani. Oil prices remained above $100 per barrel amid continued worries about possible supply disruptions.
Markets are increasingly concerned about the inflationary consequences of the conflict, especially as crude prices climbed toward levels not seen in nearly four years following disruptions to shipping through the critical Strait of Hormuz.
Higher energy prices could push central banks toward a more hawkish stance. On Tuesday, the Reserve Bank of Australia raised interest rates and warned that the conflict could contribute to renewed inflationary pressure.
Attention turns to Fed and other central banks
Investors are now focusing on a series of central bank meetings scheduled over the coming days.
The Federal Reserve will announce its latest policy decision later on Wednesday, followed by rate announcements from the Bank of Japan, the European Central Bank, the Swiss National Bank and the Bank of England later in the week.
Markets broadly expect the Fed to keep rates unchanged, but attention will center on whether policymakers believe the conflict with Iran could fuel inflation and influence the future path of interest rates.
According to CME FedWatch data, traders are now largely pushing back expectations for any Fed rate cuts until at least September.
An extended period of elevated interest rates typically weighs on gold, as higher yields increase the opportunity cost of holding non-yielding assets.
Although gold still retains some of its gains for the year, prices have pulled back sharply from the record high near $5,600 per ounce reached in late January.
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