Gold fell early Friday as the U.S. and Iran exchanged airstrikes boosting expectations that a prolonged Mideast conflict will worsen inflation and spurs Fed rate hike bets.
At issue in recent talks between the U.S. and Iran has been safe, toll-free traffic of vessels through the Strait of Hormuz, a key waterway out of the Persian Gulf vital to the energy sector. The strikes spurred oil prices, potentially influencing inflation. Higher interest rates would make gold a less attractive investment than some other assets.
Minutes of last month’s Fed policy meeting, released Wednesday, reflected growing concern about inflation and different economic scenarios that might warrant a rate hike.
August gold futures rose 1.4% Thursday to settle at $4,140.80 an ounce on Comex, and the front-month contract rallied 0.4% in the first four days of the week. Bullion slid 12% in June after dropping 0.8% in May and losing 1% in April. It decreased 7% in the first half of 2026 after rallying 64% last year. The August contract is currently down $42.90 (-1.04%) an ounce to $4097.90 and the DG spot price is $4102.80.
In the physical market, discounts in Indian deepened as gold price volatility has stymied demand, though China’s central bank reported its biggest monthly increase in gold reserves in two and a half years, according to Reuters.
U.S. negotiations with Iran were in limbo after the ramp-up of military actions this week and after the U.S. revoked a sanctions waiver allowing Iran to openly sell crude oil in global markets. The clock is ticking on a 60-day memorandum of understanding to end hostilities which began on June 18. Trump said Wednesday that the deal to end the war was “over” but some reports have indicated that talks are ongoing.
Since the U.S.-Israeli action against Iran began in late February, tensions have caused gold prices to drop while signs of détente have triggered rallies.
The expectation that the conflict may trigger Fed rate hikes is in contrast with sentiment at the start of the year, when most investors were anticipating rate cuts. The Fed last month held interest rates steady at 3.5% to 3.75%, as expected, but signaled growing support for a rate hike in 2026.
Over 75% of investors tracked by the CME FedWatch Tool are betting on interest rates staying unchanged in July while 62% believe there will be a rate hike in September. The Fed has kept interest rates unchanged this year after three previous rate cuts.
Front-month silver futures rose 3.8% Thursday to settle at $60.75 an ounce on Comex, though the September contract fell 0.5% in the first four days of the week. The most-active contract touched a record above $115 in January. Silver declined 21% in June after gaining 2.5% in May and losing 1.2% in April. It lost 15% in the first half of 2026 after rising 141% last year. The September contract is currently down $0.903 (-1.49%) an ounce to $59.845 and the DG spot price is $59.73.
Spot palladium increased 2.4% Thursday to $1,262.50 an ounce but has declined 0.9% so far this week. Palladium dropped 11% last month after losing 12% in May and rising 3.2% in April. It retreated 25% in the first half of 2026 after rising 74% last year. Currently, the DG spot price is up $20.50 an ounce to $1281.50.
Spot platinum rose 2.4% Thursday to $1,625.30 an ounce and is up 0.3% this week. Platinum tumbled 19% in June after dropping 3.2% in May and gaining 1.3% in April. Platinum slid 23% in the first half of 2026 after increasing 122% in 2025. The DG spot price is currently down $2.40 an ounce to $1622.70.
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