Gold Prices Drop as Fed Signals Rate Hikes May Be Back on the Table

TLDR

• The Fed’s April meeting minutes showed most officials are open to raising interest rates if inflation stays high.
• Gold fell about 0.4% to around $4,526 per ounce in Asian trading Thursday.
• Inflation has been rising sharply over the past two months, driven mainly by higher energy prices from the U.S.-Iran war.
• Iran said it is reviewing the latest U.S. peace proposal, while President Trump warned more military strikes could follow if no deal is reached.
• The Strait of Hormuz remains largely closed, keeping oil prices elevated.

Gold prices dropped in Asian trade on Thursday after the Federal Reserve’s meeting minutes pointed to possible interest rate hikes. The move lower came as mixed signals from the U.S.-Iran war added to uncertainty in markets.

Spot gold fell 0.4% to $4,526.48 an ounce. Gold futures also dropped 0.4% to settle around the same level.

Fed Minutes Spark Rate Hike Fears

The minutes from the Fed’s late-April meeting showed a majority of policymakers were open to “some policy firming.” That means rate hikes could be coming if inflation does not come down.

Inflation has risen sharply over the past two months. Higher energy prices, caused by the ongoing war with Iran, are the main driver.

Rising inflation has pushed bond yields higher. That is bad for gold, which does not pay interest. When yields go up, the cost of holding gold rises, making it less attractive to investors.

Gold has now fallen about 14% since the war started in late February. It has traded in a narrow range recently, with no clear direction.

Other precious metals also fell Thursday. Spot platinum dropped 0.8% to $1,938.92 per ounce, and silver fell 0.4% to $75.53 per ounce.

Analysts at MUFG said gold would likely need to see inflation ease, or clearer signs that slowing economic growth is becoming a bigger concern than inflation, before prices can recover.

Iran Talks Keep Markets on Edge

On the geopolitical side, Iran said it is reviewing Washington’s latest peace proposal. That followed comments from President Trump earlier this week that negotiations were going well.

Trump said the war is in its “final stages” and that he is willing to wait “a few days” for Iran to come to the table. But he also warned that if no deal is reached, the U.S. will resume military action.

Trump said the main U.S. goal remains preventing Iran from developing a nuclear weapon.

The Strait of Hormuz, a key route for global oil shipments, remained largely closed. That is keeping oil prices from falling sharply despite some relief earlier in the week.

Gold typically benefits from geopolitical uncertainty, but those safe-haven gains were outweighed Thursday by the fear of higher interest rates.

Market watchers said the next move for gold depends on whether inflation pressures ease or growth concerns begin to dominate the outlook.

For now, traders are watching both the Fed and the Iran situation closely for any new signals.

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