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Gold Hits Two-Month Low as US-Iran Tension Stokes Inflation Fears

Gold bracelets and necklaces are displayed at a shop in Istanbul's Grand Bazaar (AFP file)
Gold bracelets and necklaces are displayed at a shop in Istanbul's Grand Bazaar (AFP file)
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Gold Hits Two-Month Low as US-Iran Tension Stokes Inflation Fears

Gold bracelets and necklaces are displayed at a shop in Istanbul's Grand Bazaar (AFP file)
Gold bracelets and necklaces are displayed at a shop in Istanbul's Grand Bazaar (AFP file)

Gold prices fell to a two-month low on Thursday as fresh US attacks on Iran boosted the dollar and pushed oil prices higher, stoking concerns about rising inflation and clouding the interest rate outlook.

Spot gold was down 1.7% at $4,380.62 per ounce, as of 0409 GMT, earlier falling to its lowest level since March 26. US gold futures for June ‌delivery fell 1.6% ‌to $4,377.10.

The dollar rose to a one-week high, ‌making ⁠greenback-priced bullion more expensive ⁠for holders of other currencies.

"Geopolitical tensions remain high, and we've had too many false alarms from the peace deal talks. So I think the US dollar is going to remain bid, and that means gold is likely to remain under pressure," said Matt Simpson, a senior analyst at StoneX.

The US military carried ⁠out new strikes in Iran targeting a military ‌site that officials believed posed ‌a threat to US forces and commercial shipping in the Strait of ‌Hormuz, a US official said, hours after President Donald Trump ‌dismissed an Iranian report of a deal to restore traffic through the strategic waterway.

Oil prices jumped more than 3% on Thursday after Iran's Revolutionary Guards said they targeted a US airbase in response to the US ‌attack.

Elevated crude prices can accelerate inflation and keep interest rates higher for longer. While gold ⁠is seen ⁠as a hedge against inflation, higher rates tend to weigh on the non-yielding metal.

Federal Reserve Governor Lisa Cook on Wednesday said she feels the US central bank should hold short-term interest rates steady for now, but, with tariffs, the Iran war, and a surge in AI-related investment pushing prices higher, she is prepared to hike rates if needed.

Investors await the release of US Personal Consumption Expenditures data, due later in the day, for clues on the Fed's monetary policy path.

Spot silver fell 3% to $72.37 per ounce and platinum lost 1.4% to $1,890.81, both hitting a near one-month low. Palladium slid 1.9% to $1,364.26.

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ECB Chief Economist Sees Persistent Impact on Inflation from Iran War

The Euro currency symbol is seen prior to a press conference after an ECB's governing council meeting in Frankfurt, Germany, Dec. 18, 2025. (AP)
The Euro currency symbol is seen prior to a press conference after an ECB's governing council meeting in Frankfurt, Germany, Dec. 18, 2025. (AP)
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ECB Chief Economist Sees Persistent Impact on Inflation from Iran War

The Euro currency symbol is seen prior to a press conference after an ECB's governing council meeting in Frankfurt, Germany, Dec. 18, 2025. (AP)
The Euro currency symbol is seen prior to a press conference after an ECB's governing council meeting in Frankfurt, Germany, Dec. 18, 2025. (AP)

The energy shock caused by the Middle East conflict will likely have a persistent impact on inflation even if there is a quick solution to the war, the European Central Bank's chief economist, Philip Lane, said on Thursday.

While oil prices historically tended to revert to original levels after a burst of increases, the current episode may be different as energy costs may stay elevated with countries restocking inventory or diversifying their energy mix, he said.

"We had ‌an overnight, fairly ‌quick and big decline in global oil ‌supply, ⁠which has been ⁠masked until now by inventories," Lane said at a conference hosted by the BOJ and its think tank in Tokyo.

"Even if the initial energy shock starts to reverse, the second round (effects) will be with us for a while," he said.

With the energy shock pushing up prices, financial markets have fully priced in ⁠two hikes in the ECB's 2% deposit ‌rate and see a roughly 50% ‌chance of a third move over the next year. Economists are more ‌cautious and see just two hikes, followed by a cut ‌in mid-2027, a Reuters poll showed.

Lane said there could be some policy lessons from past energy shocks, such as that rising energy costs could push up inflation abruptly and cause "all sorts of non-linear" mechanisms ‌that broaden price hikes.

"But it's not the same non-linearity we had four years ago," when ⁠supply disruptions ⁠from the Ukraine war and strong demand from the COVID re-opening pushed up inflation, he said.

Central banks must acknowledge any substantial shocks and their potential impact on inflation, but avoid overreacting in setting monetary policy, Lane said.

"You have to be skillful in terms of looking at monetary transmission, consumer confidence and all these different mechanisms," he said.

While some inflationary pressures from a supply shock do calm down over time, it was important for central banks to make sure "there's no persistent belief in the population or among price-setting sectors that inflation is going to be too high for too long," he said.

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Dollar Firms to One-Week High as Gulf Tensions Flare, Yen Nears Intervention Zone

US dollar banknotes are seen in this illustration taken March 24, 2026. (Reuters)
US dollar banknotes are seen in this illustration taken March 24, 2026. (Reuters)
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Dollar Firms to One-Week High as Gulf Tensions Flare, Yen Nears Intervention Zone

US dollar banknotes are seen in this illustration taken March 24, 2026. (Reuters)
US dollar banknotes are seen in this illustration taken March 24, 2026. (Reuters)

The dollar firmed to a one-week high on Thursday after Middle East tensions ratcheted up following fresh US strikes on Iran, while the yen softened toward a level that triggered central bank intervention last month.

Iran's Revolutionary Guards said they targeted a US airbase after what they described as an early morning US attack near Bandar Abbas airport, Tasnim news agency reported, while Kuwait's army said its air defenses were intercepting hostile ‌missile and ‌drone threats.

That followed news that the US military ‌carried ⁠out new strikes targeting ⁠an Iranian drone operation that it said posed a threat to US forces and commercial shipping in the Strait of Hormuz.

Oil prices rebounded and the safe-haven dollar steadied as hopes of a swift resolution to the war faded, with investors now increasingly expecting the greenback to break higher as the Federal Reserve shifts its focus to battling inflation amid elevated energy prices.

"Geopolitics and ⁠the subsequent inflation risks remain a key concern," Alex ‌Saunders, Citi's head of global quant ‌macro strategy, wrote. "We continue to see a trim in the USD underweight."

The euro was 0.2% ‌lower at $1.1600, while the pound was down nearly 0.3% at $1.3392.

The risk-sensitive ‌Australian dollar weakened 0.4% to $0.7111to a one-week low, and the New Zealand dollar was down 0.3% at $0.58831.

The dollar index, which measures the greenback's strength against a basket of six major peers, strengthened 0.17% to 99.464, near its highest level since ‌May 21.

Markets will now look ahead to today's release of the Fed's preferred inflation gauge, the core PCE ⁠deflator, which ⁠will help shape the broader interest rate outlook.

The yen weakened to as far as 159.610 per dollar on Thursday, the lowest since April 30 and within sight of the 160 level that triggered intervention by Japanese authorities last month.

That intervention bought policymakers some breathing room, but questions linger over its lasting impact, said Tony Sycamore, market analyst at IG.

"The broader question is whether it was worth it for what essentially amounts to just a single month's relief. And furthermore, will authorities have the stomach to write a similar-sized cheque if the 160 level is breached again in the coming sessions?" he said.

Markets are pricing a roughly 70% chance of a quarter-point interest rate rise at the BOJ's June 15–16 policy meeting, LSEG data showed.

Business

Oil Surges After Iran Targets US Airbase in Retaliation

The Nord Maverick, an oil and chemical tanker sailing under the flag of Denmark, is docked at the Texas City docks next to the Marathon Galveston Bay Refinery shortly after US President Donald Trump announced a 60-day waiver of the Jones Act shipping law in Texas City, Texas, U.S. March 18, 2026. (Reuters)
The Nord Maverick, an oil and chemical tanker sailing under the flag of Denmark, is docked at the Texas City docks next to the Marathon Galveston Bay Refinery shortly after US President Donald Trump announced a 60-day waiver of the Jones Act shipping law in Texas City, Texas, U.S. March 18, 2026. (Reuters)
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Oil Surges After Iran Targets US Airbase in Retaliation

The Nord Maverick, an oil and chemical tanker sailing under the flag of Denmark, is docked at the Texas City docks next to the Marathon Galveston Bay Refinery shortly after US President Donald Trump announced a 60-day waiver of the Jones Act shipping law in Texas City, Texas, U.S. March 18, 2026. (Reuters)
The Nord Maverick, an oil and chemical tanker sailing under the flag of Denmark, is docked at the Texas City docks next to the Marathon Galveston Bay Refinery shortly after US President Donald Trump announced a 60-day waiver of the Jones Act shipping law in Texas City, Texas, U.S. March 18, 2026. (Reuters)

Oil prices jumped more than 3% on Thursday after Iran's Revolutionary Guards said they targeted a US airbase in response to a US attack near Bandar Abbas airport.

Brent crude futures rose $3.51, or 3.72%, to $97.8 a barrel by 0344 GMT, while the more active August contract gained $3.35 or 3.63%, to $95.6. The July contract is set to expire on Friday.

The US ‌West Texas ‌Intermediate futures were up $3.31, or 3.73%, ‌at $91.99.

Both ⁠benchmarks slipped more ⁠than 5% to touch their lowest in a month in the previous session on the possibility of a US-Iran deal to end their war and reopen the Strait of Hormuz.

The Revolutionary Guards said on Thursday they targeted a US airbase ⁠after what they described as an ‌early morning US attack near ‌Bandar Abbas airport, Tasnim news agency reported.

They warned ‌that any repeat of what they called aggression would ‌draw a "more decisive".

The US military launched new strikes in Iran targeting a military site that officials believed posed a threat to US forces and commercial maritime traffic ‌in the strait, a US official told Reuters.

"Oil supply remains constrained, and key ⁠sticking ⁠points have yet to be resolved," ANZ commodity strategist Daniel Hynes said in a note.

In the US, crude oil stockpiles fell by 2.8 million barrels last week, the sixth straight week of declines, according to American Petroleum Institute data.

Official inventory data from the US Energy Information Administration are due on Thursday, a day later than usual due to the Memorial Day holiday on Monday.