Gold slumps Wednesday morning ahead of this afternoon’s Fed policy statement. Gold dropped for a third straight session on inflation worries tied to the Middle East conflict. Investors await further guidance from the Federal Reserve later in the day on the economic impact of the Iran war.
The central bank is unanimously expected to keep interest rates unchanged Wednesday afternoon, but the Fed’s monetary policy statement and Chairman Jerome Powell’s discussion of economic conditions and the outlook for the rest of the year will be closely watched.
The Iran conflict appears to be set to continue indefinitely, as peace talks have stalled. U.S. President Donald Trump has told aides to prepare for an extended U.S. naval blockade of the Strait of Hormuz, the key oil artery, the Wall Street Journal reported late Tuesday, citing U.S. officials it didn’t identify. Over the weekend, Trump canceled planned travel by top aides to Pakistan for peace talks with Iran, and Tehran said it wouldn’t negotiate while being threatened.
June gold futures slid 1.8% Tuesday to $4,608.40 an ounce on Comex, and the most-active contract fell 2.8% in the first two days of the week. Bullion is down 1.5% this month after sliding 11% in March and climbing 11% in February. It rallied 64% last year. The June contract is currently down $74.80 (-1.62%) an ounce to $4533.60 and the DG spot price is $4520.10.
Trump wrote Tuesday in a post on Truth Social that the blockade is pushing Iran toward a “State of Collapse,” the Journal reported. But economists are also studying what it’s doing to inflation and the costs of goods in the United States.
In addition to the Fed, investors will be closely watching the upcoming release of the next key inflation report, the personal consumption expenditures price index, which comes out on Thursday. The PCE release will include March figures, which means it will be the first report including a full month of data since the war began. It’s usually known as the Fed’s favorite inflation measure.
All the investors tracked by the CME FedWatch Tool are betting on rates staying unchanged on Wednesday. Higher interest rates are typically bearish for gold, making the yellow metal a less attractive alternate investment than other assets. The Iran war has erased expectations that the Fed would cut interest rates this year. Most investors tracked by the tool now expect the central bank to keep U.S. interest rates unchanged until the last quarter of next year.
The conflict has roiled global markets, keeping oil prices elevated, though gold has declined as other assets have rallied . This is partly because perceived inflation risk is seen as likely to prompt the Fed to keep interest rates elevated for some time.
Fed policymakers last month kept interest rates unchanged again at 3.50% to 3.75%. The Fed has kept interest rates unchanged this year after three previous rate cuts. The central bank began raising interest rates in March 2022 to fight inflation, ultimately imposing increases of by 5.25 percentage points before beginning rate cuts in 2024.
Fed Chairman Jerome Powell’s term is also scheduled to end May 15, which could have some impact on interest rate activity. He and Trump have been at loggerheads over the president’s desire for low interest rates. Trump has appointed Kevin Warsh to succeed Powell as Fed chair, and the Senate Banking Committee is expected to advance his confirmation on Wednesday.
Front-month silver futures dropped 2.4% Tuesday to settle at $73.75 an ounce on Comex, and the July contract decreased 4.2% in the first two days of the week. The most-active contract touched a record above $115 in January. Silver is down 1.6% this month after dropping 20% last month and gaining 19% in February. It rose 141% last year. The July contract is currently down $1.905 (-2.58%) an ounce to $71.840 and the DG spot price is $71.42.
Spot palladium declined 1.2% Tuesday to $1,475.50 an ounce, and has retreated 2.4% so far this week. Palladium is down 1.4% this month after tumbling 17% in March and gaining 8.8% in February. Palladium rose 74% last year. Currently, the DG spot price is down $13.20 an ounce to $1458.50.
Spot platinum lost 2% Tuesday to $1,959.10 an ounce and slid 3.4% in the first two days of the week. It’s down 0.4% this month after declining 17% in March and advancing 15% in February. Platinum increased 122% in 2025. The DG spot price is currently down $70.30 an ounce to $1887.50.
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