Gold tumbled over $95 an ounce early Wednesday putting it at over a two-month low as Mideast war escalation hiked oil prices as the U.S. and Iran scuttled any immediate hopes of a peace accord. The gold metal got no help from this morning’s CPI data, as inflation continues to mount.
The consumer price index rose at a seasonally adjusted 0.5% for the month, putting the annual inflation rate at 4.2%. While both numbers match the forecast, this does put the annual rate above 4% for the first time in three years, according this morning’s Bureau of Labor Statistics report.
The U.S. and Iran exchanged attacks early Wednesday after President Donald Trump said Tehran downed a U.S. helicopter near the Strait of Hormuz, the key waterway for oil shipments. Iran claimed to have struck the U.S. Fifth Fleet. Meanwhile, the Kuwaiti Army said its air defenses were intercepting hostile targets.
The standoff is pressuring gold prices because of speculation that a prolonged conflict will result in persistent inflation that will force the U.S. Federal Reserve to raise interest rates, making the yellow metal a less attractive alternate investment.
August gold futures dropped 1.8% Tuesday to settle at $4,286.40 an ounce on Comex, and the most-active contract fell 1.8% in the first two days of the week. Bullion dropped 0.8% in May after losing 1% in April and sliding 11% in March. It rallied 64% last year. The August contract is currently down $97.5 (-2.27%) an ounce to $4188.90 and the DG spot price is $4182.30.
Gold has also fallen below the 200-day moving average, prompting technical selling, Bloomberg reported.
The yellow metal has fallen on hawkish news about the war since it began in late February and has rebounded whenever there are signs of détente. The latest reports included Iranian attacks in Bahrain and Kuwait and possibly Jordan.
Bets on a Fed interest rate hike this year future increased after a blowout U.S. monthly jobs report for May, which came out Friday. Fed policymakers watch both inflation and the labor market when setting monetary policy. Inflation has climbed in recent months as the conflict in Iran has spurred oil prices and the dollar, making gold a less attractive alternate investment.
Over 96% of the investors tracked by the CME FedWatch Tool are betting on rates staying unchanged at the next Fed policy meeting next week, but most anticipate a rate hike before the end of the year. The Fed has kept interest rates unchanged this year after three previous rate cuts. The Fed in April held interest rates steady at 3.5% to 3.75%, as expected, but policymakers were unusually divided. The June 16-17 meeting of Fed policymakers will be the first under new Chair Kevin Warsh.
Front-month silver futures slid 4.9% Tuesday to settle at $65.24 an ounce on Comex, and the July contract declined 5.6% so far this week. The most-active contract touched a record above $115 in January. Silver gained 2.5% in May after losing 1.2% in April and dropping 20% in March. It rose 141% last year. The July contract is currently down $0.300 (-0.46%) an ounce to $64.940 and the DG spot price is $65.56.
Spot palladium rose 1.5% Tuesday to $1,233.50 an ounce, though it declined 1.6% in the first two days of the week. Palladium fell 12% last month after rising 3.2% in April and tumbling 17% in March. Palladium rose 74% last year. Currently, the DG spot price is up $29.90 an ounce to $1259.50.
Spot platinum decreased 2.1% Tuesday to $1,724.80 an ounce and has lost 4.1% so far this week. Platinum dropped 3.2% in May after gaining 1.3% in April and declining 17% in March. Platinum increased 122% in 2025. The DG spot price is currently down $12.50 an ounce to $1708.90.
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