NEW YORK: Gold prices fell on Wednesday as oil prices surged and inflation concerns intensified after US President Donald Trump said an interim agreement aimed at ending the conflict with Iran was “over”.
Spot gold dropped 2 percent to USD4,025.67 per ounce by 11:35 a.m. EDT (1535 GMT) after hitting its lowest level since July 1 earlier in the session.
US gold futures for August delivery slipped 2.9 percent to USD4,035.20 per ounce.
“The main factor for today’s move is the increased escalation in tensions between the US and Iran, with a potential ceasefire over, we’ve seen risk assets across the board trade lower, gold included,” said David Meger, director of metals trading at High Ridge Futures.
In a flare-up of hostilities, Iran said it had targeted US military sites in Bahrain and Kuwait after US forces struck Iranian targets in response to attacks on tankers in the Strait of Hormuz. Crude oil prices jumped more than 5 percent.
Higher energy prices can fuel inflation and potentially prompt central banks to hike interest rates to contain price pressures. Although gold is often viewed as a hedge against inflation, the non-yielding metal tends to lose appeal in a high-interest-rate environment.
Markets now await the minutes from the Federal Open Market Committee’s June 16-17 meeting, due at 02:00 p.m. EDT (1800 GMT) for further clues on monetary stance.
“There is a bit of a murky environment right now in regards to the future path of rates, with the market searching for any type of information that would lead to some clarity in regards to the path of rate hikes moving forward,” Meger said.
Traders are pricing in about a 70 percent chance of a US rate hike in September, up from 62 percent on Tuesday, according to the CME FedWatch Tool.
Bank of America, in a note dated Tuesday, said it is reducing 2026 average gold forecasts by 14 percent to USD4,360 on a more hawkish Fed, but added that it still sees USD5,000 in reach once the tightening cycle ends.
Among other metals, spot silver fell 4.5 percent to USD57.33 per ounce, platinum shed 4.4 percent to USD1,568.93, and palladium dipped 4.9 percent to USD1,213.93.