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In his latest research note for Solomon Global, contributing analyst Nick Cawley explains why the Federal Reserve is expected to hold interest rates steady this week — and how escalating geopolitical tensions are reinforcing gold’s status as a safe-haven asset.

With markets pricing in a near-100% probability that the Fed will leave rates unchanged at 4.25%–4.50%, attention is turning to Chair Powell’s post-meeting comments and the updated ‘dot plot’ for clues on future policy shifts. Despite moderating inflation and a strong jobs market, concerns persist around the delayed impact of the “Liberation Day” tariffs announced by President Trump, which could drive inflation higher in the coming months.

Cawley also highlights the intensifying conflict between Israel and Iran, which continues to underpin demand for safe-haven assets. With tensions escalating and military action spreading, investor appetite for gold remains strong.

“If gold breaks and closes above its prior all-time high at $3,500/oz, price discovery should drive the precious metal to test round numbers at $3,600/oz and $3,700/oz.,” notes Cawley, contributing analyst for Solomon Global.

To download and read Nick Cawley’s full market analysis and gold outlook, click here

Stock Futures Rise

U.S. stock futures edged higher on Wednesday amid escalating tensions in the Middle East and anticipation of the Federal Reserve’s interest rate decision. By 03:30 ET, Dow futures were up 0.2%, S&P 500 futures rose 0.3%, and Nasdaq 100 futures gained 0.3%.

Recent Market Moves

On Tuesday, major indexes fell due to renewed Israel-Iran fighting and weak U.S. retail sales data. The S&P 500 dropped 0.8%, Nasdaq 0.9%, and Dow 0.7%. Volatility spiked to the highest level since late May.

Oil Prices

After a 4% jump on Tuesday driven by supply concerns amid the conflict, oil prices retreated slightly. Brent crude was down 0.3% to $76.20/barrel; WTI dipped 0.3% to $73.02/barrel.

Middle East Conflict

Israel’s air force struck Iranian nuclear and weapons sites as part of efforts to curb Iran’s missile and nuclear programs. The conflict has intensified since last Friday, with reciprocal missile attacks and casualties reported. U.S. President Trump demands “unconditional surrender” from Iran and asserts U.S. air superiority, though the role of U.S. military involvement remains under debate.

Federal Reserve Outlook

The Fed is widely expected to keep rates steady at the conclusion of its meeting, monitoring tariff impacts on inflation and growth. The Fed’s updated “dot plot” forecasts will be closely watched; markets currently price in the next rate cut around September. Rising oil prices could complicate inflation dynamics and temper easing expectations.

Crypto Regulation

The U.S. Senate passed bipartisan legislation creating a regulatory framework for stablecoins, requiring issuers to back tokens with liquid assets and disclose reserves monthly. This marks a significant milestone for cryptocurrency regulation.

Bank Capital Rule Adjustment

According to Bloomberg, U.S. regulators plan to ease the enhanced supplementary leverage ratio (ESLR) for major banks like JPMorgan and Goldman Sachs, reducing capital buffer requirements to ease constraints on Treasury trading.

European markets held steady on Wednesday as investors cautiously weighed ongoing tensions between Israel and Iran alongside the upcoming conclusion of the U.S. Federal Reserve’s policy meeting.

At 07:05 GMT, Germany’s DAX index dipped 0.1%, France’s CAC 40 gained 0.2%, and the U.K.’s FTSE 100 rose 0.1%.

Israel-Iran Conflict Raises Market Unease

The conflict between Israel and Iran entered its sixth day amid heightened geopolitical tensions. A Wall Street Journal report revealed that U.S. President Donald Trump convened senior advisers to discuss options, including potential strikes on Iran. Trump demanded Tehran’s “unconditional surrender” and claimed U.S. control over Iranian airspace, fueling fears of broader regional escalation.

Fed Meeting Nears Conclusion

Investors remain cautious ahead of the Federal Reserve’s two-day meeting wrap-up. While a rate hold is widely expected, markets will closely scrutinize Chair Jerome Powell’s remarks and updated economic forecasts, especially given signs of cooling U.S. retail sales and increased recession risks. Currently, markets anticipate two rate cuts by year-end, though this outlook could shift post-meeting.

U.K. Inflation Moderates

U.K. inflation slowed in May as consumer prices rose 3.4% year-on-year, slightly down from April’s 3.5%. Services inflation—a key focus for the Bank of England—fell to 4.7% from 5.4%, aligning with forecasts. The BoE is expected to keep rates steady on Thursday after a May rate cut to 4.25%, with two more 0.25% cuts priced in by year-end.

Other Highlights

• Sweden’s Riksbank will announce its interest rate decision later Wednesday.
• UBS was downgraded to “underweight” by Morgan Stanley due to capital uncertainties and weaker earnings prospects.
• Oil prices eased slightly, with Brent crude down 0.1% to $76.38 and WTI crude down 0.1% to $73.21, retreating from a 4% surge amid supply disruption fears in the Strait of Hormuz.

Citigroup analysts say the trajectory of oil prices will be a key factor driving stock market performance in the near term as investors monitor escalating violence in the Middle East.

In a client note, Citi highlighted that geopolitical flare-ups like the Israel-Iran conflict generally cause only short-lived impacts on equities unless they trigger sustained spikes in energy prices. The firm noted that if tensions continue to escalate, sectors likely to outperform include European energy stocks, traditional defensive sectors, and markets such as Switzerland and the UK.

The analysts pointed out that before the recent escalation, global equity valuations had priced in an average level of “geoeconomic risk,” suggesting some resilience to shocks.

On Wednesday, oil prices eased slightly, retracing part of the previous day’s 4% gain, as markets balanced concerns over potential crude supply disruptions against an impending U.S. Federal Reserve interest rate decision.

• Brent crude futures slipped 0.3% to $76.20 a barrel but remained above the $76 level for a second day.
• West Texas Intermediate (WTI) crude also fell 0.3%, settling near $73.02 per barrel by early U.S. trading.

U.S. stock futures were trading higher amid the cautious sentiment.

Meanwhile, Israel’s air force announced strikes targeting centrifuge and weapons manufacturing facilities near Tehran, part of an ongoing campaign aimed at curbing Iran’s nuclear weapons and missile programs.

The conflict has intensified since Israel’s airstrikes on Iranian nuclear sites last Friday, sparking retaliatory missile attacks and casualties on both sides.

U.S. involvement remains a critical focus. Former President Donald Trump has demanded an “UNCONDITIONAL SURRENDER” from Iran, describing Iran’s Supreme Leader Ayatollah Khamenei as an “easy target” and indicating U.S. support for Israel’s air dominance over Iran.

U.S. Vice President J.D. Vance clarified that Trump’s military actions would be aligned with American interests, though the president could still decide to take further steps to prevent Iran’s uranium enrichment.

British equities started the day on a positive note Wednesday, with the FTSE 100 inching up following data indicating a cooling in UK inflation for May. Meanwhile, the British pound strengthened against the US dollar, surpassing the $1.34 mark.

At 07:05 GMT, the FTSE 100 gained 0.08%, while the pound advanced 0.2% against the dollar. In Europe, Germany’s DAX index slipped 0.1%, whereas France’s CAC 40 edged up 0.1%.

UK Inflation Shows Slight Easing in May

Inflation in the UK softened modestly in May but remained above the Bank of England’s target rate of 2%, ahead of the central bank’s forthcoming interest rate announcement. Consumer prices increased 3.4% year-over-year, a slight decrease from April’s 3.5% rise. Monthly inflation was 0.2%, aligning with expectations but significantly down from March’s sharp 1.2% increase.

Other Market Highlights

• AO World (LSE:AO) reported a 27% rise in annual profit, fueled by strong consumer sales and improved cost efficiency.
• Unilever (LSE:ULVR) has nominated Peter ter Kulve to head its soon-to-be-listed ice cream business, despite some previous internal board concerns related to his role in the Ben & Jerry’s division.
• Ocado (LSE:OCDO) is expanding its partnership with Catalonia’s Bon Preu, planning a new fulfillment center to support online grocery deliveries in the region.

AO World (LSE:AO), the UK-based online electrical retailer, announced on Wednesday a 27% rise in adjusted pre-tax profit, reaching £43.5 million for the fiscal year ending March 31, 2025. This performance exceeded the company’s earlier revised profit guidance of £39-44 million.

The company’s core business focused on direct-to-consumer retail experienced robust growth, with revenues increasing 12% to £832 million. On a like-for-like basis, group revenue expanded 7% to £1.108 billion, fueled by the continued success of AO’s Five Star membership program and a broadened product range now offering approximately 9,000 items.

Adjusted pre-tax profit margin improved to 4.1%, up from 3.3% in the previous year, reflecting progress toward AO’s medium-term target margin of 5%.

John Roberts, AO’s Founder and CEO, remarked, “Celebrating our 25th anniversary, this has been our strongest year yet. We delivered record pre-tax profits, grew sales substantially, and continued to provide our growing customer base with reliable, exceptional service.”

The Five Star membership program showed solid momentum, with rising membership numbers, strong renewal rates, and increased share of customer spend. Repeat customers contributed over 60% of total orders, a figure AO expects to rise as its offerings and brand awareness expand.

Financially, AO World ended the year with net cash of £23 million, after acquisition-related costs for musicMagpie and funding its Employee Benefit Trust. The company also boosted its Revolving Credit Facility from £80 million to £120 million, extending its maturity to October 2028.

Looking forward, AO World forecasted adjusted pre-tax profits of £40-50 million for fiscal 2026, despite ongoing macroeconomic uncertainties. The company remains optimistic about capturing long-term opportunities within its estimated £28 billion total addressable market.

Gold prices remained stable during Wednesday’s Asian trading session as investors took a cautious stance ahead of the Federal Reserve’s interest rate announcement later in the day. The metal’s appeal as a safe haven was bolstered by escalating tensions between Israel and Iran, alongside reports of potential direct U.S. military involvement in the region.

Earlier this week, gold gave back much of its recent gains following news of Iran seeking a ceasefire. However, renewed air strikes and stern warnings from U.S. President Donald Trump toward Iran have shifted the mood back to risk aversion.

Spot gold was steady at $3,388.25 per ounce, while August gold futures held firm near $3,405.95 as of 01:56 ET (05:56 GMT).

Middle East Conflict and Weak U.S. Data Support Bullion

The geopolitical climate intensified as Israel and Iran continued aerial confrontations into their sixth day. Reports from the Wall Street Journal suggested that President Trump is contemplating U.S. military strikes on Iran, including its nuclear command infrastructure, demanding “unconditional surrender” from Tehran.

Meanwhile, Reuters noted an increased deployment of U.S. fighter jets and extended stationing of warplanes in the Middle East. Though described by the Pentagon as defensive, these moves have raised concerns over possible U.S. involvement in the conflict.

This backdrop coincided with disappointing U.S. economic figures, including a 0.9% drop in May retail sales, which strengthened expectations for a Federal Reserve rate cut later this year. The Fed’s policy meeting concludes on Wednesday, with markets widely expecting interest rates to remain unchanged but closely watching for revised economic projections.

Given ongoing geopolitical risks and soft U.S. data, gold is expected to maintain its support in the near term.

Metal Prices Gain on Weaker Dollar

Other metals also experienced gains amid a weaker U.S. dollar, making commodities more affordable for overseas buyers. The Dollar Index dipped 0.2% in Asian trading.

Silver futures increased by 0.6% to $37.37 per ounce, while platinum futures rose 0.5% to $1,269.90 per ounce. Copper futures advanced as well, with London Metal Exchange copper up 0.3% to $9,703.75 per ton and U.S. copper futures climbing 0.9% to $4.839 per pound.

Electric Guitar PLC (LSE:ELEG) has raised £775,000 through a placing of new ordinary shares, with proceeds earmarked for funding a reverse takeover acquisition and general working capital needs. The company is actively engaged in discussions regarding potential acquisitions in the energy and artificial intelligence sectors, though no definitive agreements have yet been reached. This process may result in a temporary suspension of trading on AIM.

In addition, Electric Guitar has appointed Novum Securities Limited as joint broker to support its strategic growth. Notably, key shareholders Sanderson Capital and Mayford participated in the fundraising round.

About Electric Guitar PLC

Operating within the financial sector, Electric Guitar PLC primarily focuses on acquisitions and investments. Currently classified as an AIM Rule 15 cash shell, the company aims to complete significant acquisitions or seek re-admission to AIM as an investing entity.

TAO Alpha PLC (LSE:TAO), a firm specializing in decentralized AI and blockchain solutions, has successfully secured £5 million through a recent fundraising round. The capital will be directed towards expanding its developer team and scaling operational capabilities.

In addition, TAO Alpha has formed a strategic partnership with Tiger Royalties and Investments plc to oversee the Tiger Alpha subnet, which is already delivering substantial revenue. The company is also progressing with an application to list on the OTCQB market, aiming to enhance its visibility and growth potential within the US blockchain and cryptocurrency sectors.

About TAO Alpha

Founded in 2021 and headquartered in the UK, TAO Alpha operates within the entertainment industry, leveraging blockchain and decentralized AI technologies to innovate in its space.

Dewhurst Group PLC (LSE:DWHT) posted a resilient first-half performance with revenue climbing 2% to £31.6 million and operating profits rising 5% to £3.8 million. The company’s international operations, notably within the Keypad division, were key drivers of growth, offsetting a decline in revenues from its UK Lift segment.

While Dewhurst maintains a robust balance sheet, ongoing challenges such as North American tariff pressures and a softer UK lift market are expected to influence results in the second half of the year. To address these pressures, the company is undertaking a reorganization of its Australian operations to sharpen customer focus and enhance operational efficiency.

The company’s outlook remains positive thanks to steady financial health and continued revenue growth, though technical analysis suggests some short-term bearish momentum. Valuation metrics are fair, offering a balanced proposition for investors considering entry.

About Dewhurst Group

Dewhurst Group PLC is a manufacturer specializing in components for lifts, transport systems, and keypad technology. With a broad footprint in both domestic and international markets, the company’s growth is increasingly driven by its non-UK operations, underpinning its expanding global presence.