Spot gold prices fell by 0.2% to $4,063.87 per ounce as of 0043 GMT, reaching their lowest level since November 21. The decline comes amid heightened geopolitical tensions in the Middle East and concerns over potential interest rate hikes by the Federal Reserve.
U.S. gold futures for August delivery also dropped by 1.1% to $4,086.50. The U.S. military launched a new round of strikes against targets in Iran, escalating tensions in the region.
In response, Iran announced the closure of the Strait of Hormuz, causing oil prices to surge by more than $2. Elevated oil prices can lead to increased inflation, which typically boosts gold's appeal as a hedge.
However, the prospect of higher interest rates, which tend to weigh on non-yielding assets like gold, has dampened investor sentiment. U.S. consumer inflation data showed the fastest increase in three years in May, driven by rising energy prices amid the Middle East conflict.
This data supports the Federal Reserve's decision to maintain interest rates unchanged into 2027. Market participants are now awaiting the release of the U.S. Producer Price Index for May to gain further insights into the Fed's monetary policy stance.
Meanwhile, Ivory Coast's gold production is projected to rise to 62 metric tons in 2026 from 59.33 tons in 2025, as existing mines expand operations. Other precious metals also saw mixed movements, with spot silver falling 0.9% to $63.15 per ounce, platinum dropping 0.6% to $1,655.06, and palladium gaining 1% to $1,225.25.
Background
Gold is traditionally viewed as a safe haven during times of geopolitical uncertainty and inflationary pressures. However, the prospect of rising interest rates can offset this appeal, as higher rates increase the opportunity cost of holding non-yielding assets like gold.
Looking ahead, investors will closely monitor geopolitical developments and economic data releases to gauge the future trajectory of gold prices.
