Gold ticked lower Wednesday as investors awaited the afternoon’s economic guidance from the Federal Reserve for further direction. The yellow metal continues to get support from haven demand triggered by the escalating conflict in the Middle East.
Investor concern is mounting that the U.S. will become more directly involved in Israeli strikes against Iran after President Donald Trump on Tuesday called for Iran’s “unconditional surrender” in a social media post and referred to Israel’s actions against the country with the word “we.” The conflict extended into a sixth day.
Separately, investors will look to the guidance from the Fed in the afternoon for the latest signals on the health of the economy and the likely timeframe for long-awaited interest rate cuts, though the central bank is widely expected to leave rates unchanged at its meeting this week and the next one in July.
August gold futures declined 0.3% Tuesday to settle at $3,406.90 an ounce on Comex, and the front-month contract dropped 1.3% in the first two days of the week. Bullion slipped 0.1% last month after increasing 5.4% in April and gaining 11% in March. It’s up 29% this year. The metal rose 27% in 2024, its biggest annual gain since 2010. The August contract is currently up $4.70 (+0.14%) an ounce to $3411.60 and the DG spot price is $3395.00.
Citigroup forecast early this week that gold prices would return to about $2,500 to $2,700 an ounce by the second half of 2026 on weaker investment demand, better growth prospects and Fed interest rate cuts.
Trump’s post Tuesday also warned of a possible strike against Iran’s Supreme Leader Ayatollah Ali Khamenei. Oil prices soared. The possibility of U.S. direct engagement heightened the markets’ risk premiums and is likely to send investment into so-called haven assets like gold. Gold is a traditional hedge against geopolitical and economic uncertainty.
Separately, the Fed is expected to leave interest rates unchanged at 4.25% to 4.50%. Most investors tracked by the CME FedWatch Tool expect the Fed to begin interest rate cuts in September. Lower interest rates are typically bullish for gold, making the yellow metal a more attractive alternate investment.
The Fed held rates at policymakers’ meetings this year after reducing them three times in 2024. 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 last year. Previously, the Fed had kept rates at 5.25% to 5.50% for a year.
Front-month silver futures rallied 1.9% Tuesday to settle at $37.15 an ounce on Comex, and the July contract rose 2.2% in the first two days of the week. Silver added 0.6% in May after dropping 5.2% in April and advancing 9.9% in March. It gained 21% in 2024. The July contract is currently down $0.066 (-0.18%) an ounce to $37.085 and the DG spot price is $37.08.
Spot palladium gained 1.5% Tuesday to $1,057.50 and is also up 1.5% for the week. Palladium advanced 2.8% last month after falling 4.9% in April and rising 7.3% in March. Palladium dropped 17% last year. Currently, the DG spot price is up $8.10 an ounce to $1065.50.
Spot platinum rose 1% Tuesday to $1,273.10 an ounce and is up 3.3% so far this week. It surged 8.6% in May after retreating 3.1% in April and increasing 6.7% in March. Platinum lost 8.4% in 2024. The DG spot price has currently jumped up $47.90 an ounce to $1314.60.
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