Gold Declines Amid Iran Conflict, Rising Oil Prices, and Diminished Rate Cut Expectations

Key Takeaways

• Gold prices retreated by approximately 1–1.5% on Thursday, fluctuating between $4,441 and $4,476 per ounce.
• Market volatility is being fueled by contradictory reports from the U.S. and Iran regarding potential peace negotiations.
• Crude oil prices have climbed back past $100 per barrel as the Strait of Hormuz remains effectively inaccessible.
• Expectations for a Federal Reserve rate cut in 2024 have virtually vanished, with markets now pricing in a 38% probability of a rate hike before the year ends.
• A strengthening U.S. dollar is exerting downward pressure on gold, as the metal becomes costlier for international investors.

(SeaPRwire) –   Following two consecutive days of gains, gold prices experienced a decline on Thursday as investors weighed conflicting reports from Washington and Tehran concerning the status of peace talks.

Spot gold prices dipped roughly 1.5% to approximately $4,441 per ounce, while U.S. gold futures saw a decline of about 2.5%, settling at $4,457.

Earlier in the week, gold had recovered to levels above $4,500 following a sharp correction, bolstered by a softer dollar and cautious optimism regarding diplomatic efforts.

President Donald Trump asserted that Iran is eager for a deal, claiming that Tehran’s military capabilities have been “obliterated.” He further characterized the behavior of Iranian negotiators as “very different and strange.”

In response, Iran’s foreign minister stated that while the nation is evaluating a proposal from the U.S., there is no intention to engage in formal discussions to resolve the conflict.

Market experts suggest that gold is currently in a consolidation phase. “In the near term, gold is trading inside a defined range,” noted Max Baecker, President of American Hartford Gold. “The market needs to break through the mid-$4,500s to change the current sentiment.”

Kyle Rodda of Capital.com indicated that price action over the next few days will be dictated by news headlines. “The most significant movements will likely occur early next week, once there is more clarity on whether the U.S. will initiate a ground invasion in Iran.”

Oil Above $100 as Hormuz Stays Shut

Brent crude prices rose back above $100 per barrel on Thursday. The Strait of Hormuz, a critical transit point for roughly 20% of global oil and liquefied natural gas, has remained effectively closed since the commencement of the U.S.-Israeli military operations against Iran.

Although prices reached approximately $120 earlier this month before experiencing a slight decline, they remain significantly elevated compared to pre-war levels.

Rising oil prices contribute to higher manufacturing and transportation costs, which in turn fuels inflation. This dynamic reduces the likelihood of central bank interest rate cuts, creating a headwind for gold, which does not generate yield.

Rate Cut Hopes Fade

Prior to the outbreak of the conflict, the market anticipated at least two Federal Reserve rate cuts this year. That outlook has since been completely reversed.

Data from the CME Group’s FedWatch tool indicates that there is now almost no expectation of a rate cut in 2024. Approximately 38% of traders are now factoring in a potential rate hike by December, while roughly 93% anticipate that the Fed will maintain current rates during its April meeting.

The U.S. dollar has also gained strength as investors seek refuge in safe-haven assets. A stronger dollar increases the cost of gold for non-U.S. buyers, which typically suppresses demand.

On Thursday morning, President Trump reiterated his call for Iran to reach an agreement with Washington, repeating his assertion that Tehran’s military forces have been destroyed.