Gold fell on Thursday, hovering near a one-week low set in the previous session, as renewed U.S.-Iran hostilities lifted oil prices and reignited concerns about inflation and higher-for-longer interest rates.
Edgar Su | Reuters
Gold rose more than 1% on Thursday as bargain hunting emerged after prices fell to a one-week low, while investors kept a close watch on developments in the Middle East.
Spot gold was up 1.1% at $4,122.15 per ounce, after dropping to its lowest since July 1 on Wednesday. U.S. gold futures for August delivery were up 1.3% at $4,134.10
“There is some bargain hunting coming in here after the drop yesterday. In the short term, the main driver for gold is the Fed,” said Bob Haberkorn, senior market strategist at StoneX.
If the Fed takes a more dovish approach to interest rates, gold and silver are likely to move higher and, conversely, if it signals a need for further rate hikes, both metals will likely come under pressure, Haberkorn added.
On the geopolitical front, Iranian armed forces launched attacks against U.S. military infrastructure in neighbouring Gulf states following U.S. strikes in Iran’s southern coastal and eastern provinces, putting strain on a three-week-old ceasefire agreement.
Higher energy prices due to the war can fuel inflationary pressures and bolster expectations of interest rate hikes by central banks. While gold is often viewed as a hedge against inflation, higher rates tend to weigh on the non-yielding metal by increasing the appeal of interest-bearing assets.
Traders are pricing in about a 64% chance of a rate hike in September, according to the CME FedWatch Tool.
The minutes from the Federal Reserve meeting in June showed rising concern about inflation, with a handful of policymakers seeing grounds for a rate hike before the central bank opted to keep rates on hold.
Meanwhile, investors will closely monitor next week’s inflation data and Fed Chair Kevin Warsh’s congressional testimony for further insight into the monetary direction.
In a note on Thursday, HSBC cut its average gold price forecasts for 2026 and 2027 to $4,560 and $4,925, respectively, from $4,864 and $5,000.
Among other metals, spot silver gained 2.3% to $60.00 per ounce, platinum rose 3% to $1,625.83 and palladium was up 3.3% to $1,254.28.
