Gold Falls Below $4,500 as Middle East Tensions Rise and U.S. Jobs Data Looms

TLDR

• Gold dropped roughly 1% to around $4,444 per ounce on Wednesday
• Iranian attacks on U.S. targets in Kuwait and Bahrain dashed hopes of a U.S.-Iran deal
• Rising oil prices are fueling inflation fears, keeping rate hike expectations alive
• The U.S. dollar strengthened, making gold more expensive for foreign buyers
• Traders are holding back ahead of Friday’s nonfarm payrolls report

Gold prices fell on Wednesday as new Middle East fighting dimmed hopes of a U.S.-Iran peace deal, while traders waited on key U.S. jobs data for clues on interest rates.

Spot gold slipped 1.0% to $4,444.86 an ounce. Gold futures also fell 1.0% to $4,475.62 an ounce by early Wednesday morning.

The drop came after the U.S. military reported that Iranian forces launched air attacks on Kuwait, Bahrain, and other targets. The U.S. said the attacks were repelled or failed.

Iranian state media, however, claimed that the Islamic Revolutionary Guard Corps struck the U.S. Fifth Fleet headquarters in Bahrain. Iran said this was retaliation for a U.S. strike on a communications tower near Qeshm.

President Trump said talks between Washington and Tehran are still ongoing. But the fresh fighting made markets less confident a deal is close.

Oil Prices Rise, Inflation Fears Return

Brent crude futures rose on the back of the conflict. Traders are worried that a deal to reopen the Strait of Hormuz — a key shipping lane for around a fifth of the world’s oil — is now less likely.

Higher oil prices raise concerns about inflation. If inflation picks up, central banks may be forced to raise interest rates.

Markets currently expect the Federal Reserve to hold rates steady at its June meeting. But traders are still pricing in the possibility of a hike later this year.

Gold, which pays no yield, tends to perform poorly when interest rates are high or rising.

The U.S. dollar also strengthened, which can make gold more expensive for buyers using other currencies. Investors have moved toward the dollar during the Iran conflict, partly because the U.S. is a major energy exporter.

Markets Wait on U.S. Jobs Data

Data released Tuesday showed U.S. job openings rose unexpectedly in April. That reinforced the view that the Fed may keep policy tight for longer.

Traders are now watching several data releases due Wednesday, including the ADP private employment report, the ISM services survey, and factory orders figures.

All of this comes before Friday’s nonfarm payrolls report, which is closely followed by markets.

Gold has been trading below the $4,500 level as uncertainty keeps buyers on the sidelines.

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