Gold prices fell more than 1% on Thursday as traders recalibrated U.S. rate expectations amid surging oil prices and ongoing Middle East uncertainty.
Spot gold dropped 1.2 percent to $4,451.47 per ounce by 0811 GMT, while U.S. gold futures for April delivery plunged 2.3 percent to $4,448. The sell-off extended losses across the precious-metals complex: spot silver fell 2.7 percent to $69.36 an ounce, platinum shed 2.3 percent to $1,874.90, and palladium dropped 2.5 percent to $1,387.53.
The trigger was a classic clash of forces that have long dictated gold’s direction. Surging crude oil, with Brent futures climbing back above the psychologically important $100-a-barrel level, is reigniting inflation worries.
Higher energy costs tend to ripple through the economy, pushing up consumer prices. While that normally drives investors toward gold as a traditional inflation hedge, the market’s sudden reassessment of Federal Reserve policy is proving to be the more powerful weight.
“You’re seeing an acceleration of the idea that… this war will mean inflation and inflation will mean a response from central banks, which will mean higher interest rates,” said Ilya Spivak, head of global macro at Tastylive.
Markets now price in a 37 percent probability of at least one U.S. rate hike by December, according to CME Group’s FedWatch Tool — a dramatic reversal from the pre-conflict expectation of at least two rate cuts this year. With virtually no chance of a cut now priced in, the opportunity cost of holding non-yielding bullion has risen sharply.
The geopolitical backdrop remains fluid and volatile. Fighting in the Middle East has already disrupted energy flows, keeping oil elevated and stoking fears of prolonged supply shocks. President Donald Trump, speaking from the White House, insisted Wednesday that Iran is “desperate” to strike a deal to end the conflict, directly contradicting Tehran’s foreign minister, who said his government was merely reviewing a U.S. proposal but had “no intention” of entering talks to wind down hostilities.
White House press secretary Karoline Leavitt reinforced the hard line, saying Trump has vowed to hit Iran even harder if Tehran refuses to accept that it has been “defeated militarily.”
Analysts say the next 24 to 48 hours will be dominated by headline-driven swings as diplomats and military planners race against the clock. Kyle Rodda, senior financial-market analyst at Capital.com, told clients, “In the next 24 to 48 hours, (gold prices) will just be about reacting to headlines about negotiations. The really big moves will happen probably at the start of next week when it becomes clearer whether the U.S. launches a ground invasion in Iran over the weekend.”
For now, the market’s focus has shifted decisively from safe-haven buying to policy risk. Higher-for-longer interest rates would keep pressure on gold even if the conflict drags on, because the metal offers no yield in an environment where cash and short-term bonds suddenly look more attractive.
Whether the weekend brings de-escalation or escalation will likely set the tone for precious metals well into next week. Until then, traders are left balancing two powerful but opposing narratives: war-driven inflation on one side and an increasingly hawkish Federal Reserve on the other.
For gold, that tension has produced a clear verdict in Thursday’s trading: sell first, ask questions later.
WHAT YOU SHOULD KNOW
Gold prices fell sharply on Thursday, with spot gold dropping 1.2% to $4,451.47/oz, primarily due to surging oil prices above $100/barrel that are stoking inflation fears and driving higher expectations for U.S. Federal Reserve rate hikes this year.
