Gold Falls Below $4,200/Oz as Iran Tensions Fuel Inflation Concerns
Gold prices extended losses for a fourth consecutive session on Wednesday, pressured by a stronger US dollar and rising expectations of another Federal Reserve interest rate hike, as renewed US attacks on Iran intensified concerns over energy-driven inflation.
Spot gold declined 1.9% to $4,180.85 per ounce at 09:06 WIB, touching its lowest level since March 23.
Meanwhile, US gold futures also slipped 1.9% to $4,204.75 as investors reduced exposure ahead of the highly anticipated US Consumer Price Index (CPI) report scheduled for release on Wednesday.
Washington launched fresh strikes against Iranian targets on Tuesday following the crash of a US military helicopter near the Strait of Hormuz, reigniting fears of broader disruptions to global energy supplies.
Oil prices climbed around 1% on Wednesday, adding to concerns that higher fuel costs could accelerate inflation and complicate the Federal Reserve’s policy outlook.
Persistent inflation expectations have prompted investors to scale back forecasts for US rate cuts. More than 70% of market participants are now pricing in the possibility of a Fed rate hike by December.
Higher interest rates typically weigh on non-yielding assets such as gold by increasing the opportunity cost of holding precious metals.
US Treasury yields remained near multi-month highs, while the US dollar stayed firm ahead of the inflation report. The US Dollar Index (DXY) edged up 0.1% during the Asian trading session, hovering near a two-month high reached earlier this week.
XAU/USD Outlook
Investors are closely watching the upcoming CPI data for further signs of strengthening inflationary pressures. Economists expect annual consumer inflation to rise to around 4.2% in May, marking the highest reading since April 2023 and potentially reinforcing expectations that the Federal Reserve will maintain a hawkish monetary policy stance.
Markets are also awaiting the Federal Reserve policy meeting on June 16–17, where policymakers are widely expected to keep interest rates unchanged, although officials could still signal a more aggressive outlook if inflation remains elevated.