Market Overview
Spot gold increased 0.9% to $4,107.57 per ounce by 21:25 ET (01:25 GMT) after earlier falling to $4,023.96, its weakest level since late November. U.S. gold futures, however, slipped 0.2% to $4,124.92/oz as market participants priced in expectations of higher‑for‑longer Federal Reserve rates. The precious metal had dropped more than 4% in the preceding session.
Geopolitical Context
The United States launched fresh strikes on Iran overnight, prompting Iran to halt all vessel traffic through the Strait of Hormuz, a critical chokepoint for global energy shipments. While heightened geopolitical risk typically boosts demand for safe‑haven assets like gold, traders focused on the inflationary impact of rising energy prices and the prospect of tighter U.S. monetary policy, which limited bullion’s appeal.
Inflation and Monetary Policy
U.S. consumer‑price data released on Wednesday showed CPI up 4.2% year‑over‑year in May, the fastest pace in three years, driven largely by higher energy costs. The report reinforced market expectations that the Federal Reserve will keep policy rates elevated for an extended period and could resume tightening later in 2026 if price pressures persist. Interest‑rate futures now imply a markedly higher probability of at least one Fed rate hike before year‑end, a sharp shift from earlier expectations.
Currency and Market Sentiment
Higher interest rates increase the opportunity cost of holding non‑yielding assets such as gold and bolster the U.S. dollar, making bullion more expensive for overseas buyers. The U.S. Dollar Index remained largely flat during Asian trading hours, staying near a two‑month high reached earlier in the week. Investors are awaiting U.S. producer‑price data later on Thursday for additional clues on inflation trends and the Fed’s policy trajectory.
Other Precious Metals
Silver advanced 1.6% to $64.42 per ounce, while platinum rose 1.1% to $1,685.60 per ounce.