Gold Rebounds as Investors Balance Geopolitical Risks and Fed Outlook

Gold prices edged higher on Thursday as investors returned to safe-haven assets following renewed military action between the United States and Iran, while a steadier U.S. dollar and expectations for Federal Reserve policy remained in focus.

Spot gold climbed 0.7% to $4,104.22 per ounce, while U.S. gold futures also gained 0.7% to $4,112.75 per ounce by 05:47 ET (09:47 GMT).

Fed Minutes Provide Mixed Signals

The latest Federal Reserve meeting minutes offered support to bullion after suggesting policymakers were divided over the interest-rate outlook.

Analysts at Vital Knowledge noted that officials saw reasons to consider another rate increase during June while also discussing the possibility of easing monetary policy later this year.

Although lower interest rates generally benefit gold by reducing the opportunity cost of holding non-yielding assets, the minutes also highlighted ongoing concern about inflation remaining above target.

Price pressures in the United States have accelerated since the conflict between the U.S. and Iran intensified in late February. Federal Reserve Chair Kevin Warsh reiterated last week that bringing inflation back to the central bank’s 2% objective remains a priority.

Safe-Haven Demand Returns

Gold entered Thursday after posting losses for three consecutive sessions as rising oil prices strengthened expectations that inflation could remain elevated.

The U.S. dollar remained firm, with the dollar index trading close to the 13-month highs reached in June. A stronger greenback typically reduces demand for gold among overseas investors.

“Any rebound in energy prices will reinforce expectations that the Fed may keep interest rates higher for longer to combat stubbornly high inflation,” ANZ analysts said in a note.

The United States launched additional strikes against Iran after President Donald Trump announced that the ceasefire with Tehran was “over.”

Washington said the military action followed attacks on commercial ships travelling through the Strait of Hormuz.

Iran retaliated with strikes against what it described as U.S. military facilities in Kuwait and Bahrain, while the Islamic Revolutionary Guards Corps warned that further attacks would follow if American operations continue.