Gold slides to two-month low amid war‑driven inflation and rate‑hike expectations

Gold prices dropped to a two‑month trough on Wednesday, with spot gold trading 1.3% lower at $4,447.71 per ounce as of 2:08 p.m. EDT, after slipping to the lowest level since March 27 earlier in the session. U.S. gold futures for June delivery closed 1.2% down at $4,448.40.

Peter Grant, vice president and senior metals strategist at Zaner Metals, said the dominant factor remains the Middle East conflict. Initial optimism has faded as the war drags on, heightening concerns about inflation. The closure of the Strait of Hormuz has driven Brent crude higher, feeding inflation worries and bolstering expectations of further rate hikes.

Iranian state television reported that Tehran will restore pre‑war shipping volumes through the strait within a month, as part of a framework deal that also calls for the withdrawal of U.S. forces from the area. The news briefly lifted gold, but markets still anticipate energy‑driven inflation prompting the Federal Reserve to raise its benchmark rate by 25 basis points before year‑end. Despite its traditional role as an inflation hedge, gold struggles in a high‑rate environment. Minneapolis Fed President Neel Kashkari warned that the central bank must focus on curbing emerging inflation risks, while noting it is too early to project a policy‑rate change. Investors await Thursday’s U.S. Personal Consumption Expenditures data for further clues on monetary direction.

Silver slipped 3.2% to $74.46 per ounce, and analysts at Bank of America cautioned that, although a gold rally could push silver above $100 per ounce in coming months, sustained outperformance is unlikely due to weakening fundamental demand. Platinum fell 2.1% to $1,916.90, while palladium edged up 0.1% to $1,386.47.