Gold prices remained under pressure on Thursday, trading well below the $5,000 per ounce threshold, as investor uncertainty surrounding interest rates offset any safe-haven demand from ongoing Middle East tensions.
The yellow metal has broken below the $5,000 to $5,200 per ounce range that had held for about a month, largely in response to the Fed leaving rates unchanged on Wednesday and signaling caution over inflation risks from the ongoing conflict involving the U.S., Israel, and Iran. The move came after U.S. producer price data for February outpaced expectations, reinforcing the prospect that persistent inflation would restrict the Federal Reserve’s scope to lower rates in the near term.
According to CME’s FedWatch tool, traders now broadly expect no changes to the benchmark rate until at least September. Analysts at OCBC noted that market participants are focusing more on inflation risks than on demand for geopolitical hedges, with rising real yields reducing gold’s appeal as a defensive asset.
Meanwhile, gold may continue to struggle unless there is a marked weakening in the U.S. dollar or a renewed expectation for imminent rate cuts from the Fed, as per the analysts.
While gold would typically attract safe-haven flows amid escalating military action, this has been countered by fears that spiking oil prices will fuel further inflation and keep major central banks on a cautious policy footing. Oil prices have risen as the conflict deepened, including retaliatory strikes by Iran and related disruptions to energy infrastructure and shipping in the region.
On Thursday, the Bank of Japan left its interest rates steady as anticipated, while the European Central Bank, Bank of England, and Swiss National Bank are expected to announce rate decisions later in the day.
From a broader perspective, gold extended its declines for a seventh consecutive session, facing the longest losing streak since October 2023. Since hostilities began in late February, gold has lost nearly 9% from its late-January record high above $5,595 an ounce. Despite this, the metal remains up over 10% for the year.
Following Wednesday’s Fed meeting, Chair Powell addressed speculation about his position amid a Department of Justice probe. He stated he has no plans to resign and would remain in his post even in a temporary capacity if his current term ended before a successor is confirmed. This investigation has increased concerns over potential political influence at the Federal Reserve, a factor that could support gold sentiment.
As of 4:17 PM (Bangkok time) on Thursday, spot gold was quoted at around $4,710.29 per ounce, with gold futures contracts for April delivery trading at $4,702.10 per ounce.
