Gold prices moved lower on Wednesday as investors monitored developments surrounding the conflict between the United States and Iran, fluctuations in energy markets and expectations for Federal Reserve monetary policy.
Spot gold declined 0.2% to $4,117.31 per ounce at 02:36 ET (06:36 GMT), while US gold futures fell by the same percentage to $4,134.92 per ounce.
The decline extended across other precious metals. Silver lost 1.2% to $57.2955 per ounce, platinum decreased 1.8% to $1,627.45, and spot palladium fell 1.6% to $1,088.40.
The US Dollar Index rose 0.1% to 101.80, providing an additional factor for investors assessing dollar-denominated commodities.
Bullion has declined more than 1% since the start of the week and remains approximately one-fifth below its level when the US-Iran conflict began in late February.
The conflict has affected energy supplies and contributed to higher oil prices, raising questions about the outlook for inflation and interest rates.
Gold does not provide interest income, meaning higher yields on bonds and other interest-bearing assets can increase the opportunity cost of holding the metal.
Oil Market Volatility Adds to Uncertainty Over Inflation
Oil prices were broadly stable on Wednesday after declining from a five-month high in the previous session.
The earlier retreat followed reports suggesting that diplomatic efforts could lead to an agreement to end the conflict involving Iran.
Those reports were subsequently challenged by a diplomat who rejected suggestions that an agreement was close.
Gold initially gained as oil prices declined following the reports of possible negotiations, before reversing its advance when crude prices recovered.
The US dollar and government bond yields also moved lower during the period of fluctuating energy prices.
Market participants continued to assess the possible effects of developments in the Middle East on energy availability and inflation.
Higher energy prices can contribute to inflationary pressures, potentially influencing the interest rate decisions of central banks.
For gold investors, the relationship between inflation expectations and monetary policy remains relevant because changes in interest rates can affect the relative attractiveness of non-yielding assets.
US Housing Figures Indicate Slower Activity
Recent US economic data provided additional information about conditions in the domestic economy ahead of the Federal Reserve’s next policy meeting.
September housing starts declined, while pending home sales fell to a record low, indicating reduced activity in the residential property market.
Longer-dated US Treasury securities advanced as oil prices retreated and investors considered the economic data.
The movements in Treasury prices were accompanied by lower bond yields, which can affect demand for precious metals.
The housing figures added to the economic indicators being monitored as investors evaluated the potential direction of US monetary policy.
Federal Reserve Expected to Hold Rates in October
The Federal Reserve is scheduled to hold its next monetary policy meeting on 27–28 October, with market participants largely expecting no change to the benchmark interest rate.
Comments from Fed Chair Kevin Warsh on Friday did not materially alter those expectations.
Market pricing indicated a probability of less than 17% that policymakers would raise interest rates by 25 basis points at the October meeting.
Nevertheless, inflation remains above the Fed’s 2% target, and traders were assigning an approximately 85% probability to another rate increase before the end of 2026.
Warsh’s remarks preceded the central bank’s communications blackout period, which begins on Saturday and restricts public commentary from Federal Reserve officials ahead of the policy decision.
With limited additional guidance expected from policymakers before the meeting, investors are focusing on economic releases, Treasury yields and developments in energy markets.
Gold’s decline on Wednesday came as uncertainty surrounding the Iran conflict and the direction of US interest rates continued to influence precious metals trading.
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