Gold prices extended their losses on Thursday, trading close to a one-week low as renewed military tensions between the United States and Iran boosted crude oil prices and revived concerns over persistent inflation. Rising expectations that the U.S. Federal Reserve could keep interest rates higher for longer also weighed on bullion demand.
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Spot gold slipped 0.4% to 4,060.46 dollar per ounce, while U.S. gold futures for August delivery declined 0.3% to 4,069.80 dollar per ounce during early trading.
U.S.-Iran Conflict Escalates, Oil Prices Jump
Market sentiment weakened after the U.S. launched fresh military strikes targeting Iranian positions to secure shipping through the Strait of Hormuz. Iran responded with attacks on Kuwait and Bahrain, raising fears of a broader regional conflict and pushing crude oil prices higher.
Fed Rate Hike Expectations Weigh on Gold
Analysts believe stronger oil prices may fuel inflation, increasing the likelihood that the Federal Reserve will maintain a tighter monetary policy. According to market expectations, investors are increasingly pricing in additional U.S. interest rate hikes over the coming months.
Higher interest rates generally reduce the appeal of gold because the precious metal does not generate interest income. Although gold is traditionally viewed as a hedge against inflation, expectations of prolonged elevated borrowing costs have limited investor demand.
Bank of America Cuts 2026 Gold Price Forecast
Adding to the cautious outlook, Bank of America lowered its average gold price forecast for 2026 by 14%, citing a more hawkish Federal Reserve policy stance.
Among other precious metals, silver also declined, while platinum and palladium posted modest gains during the session.
FAQs
1. Why did gold prices fall today?
Gold prices declined due to renewed U.S.-Iran tensions, rising crude oil prices, stronger expectations of Federal Reserve rate hikes, and persistent inflation concerns.
2. How do higher interest rates affect gold?
Higher interest rates increase the appeal of interest-bearing assets, making non-yielding assets like gold relatively less attractive to investors.
3. Why are oil prices influencing the gold market?
Higher crude oil prices can increase inflation expectations, which may prompt central banks to keep interest rates elevated, creating pressure on gold prices.
4. What is Bank of America’s latest outlook on gold?
Bank of America has lowered its average 2026 gold price forecast by 14%, citing expectations of a more hawkish Federal Reserve policy.
5. How did other precious metals perform?
Silver extended its decline during the session, while platinum and palladium recorded modest gains despite weakness in the broader precious metals market.
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