Gold falls near one-week low as US-Iran tensions raise rate-hike bets

Gold prices fell near a one-week low, with spot gold down 0.2% at $4,068.77 per ounce by 0522 GMT. The metal had dropped to its lowest level since July 1 on Wednesday.

US gold futures for August delivery declined 0.1% to $4,077.60.

The pressure on gold came after the US military said on Wednesday it had launched fresh strikes on Iran to keep the Strait of Hormuz open for shipping.

The move triggered Iranian attacks on Kuwait and Bahrain, marking another escalation that threatened efforts to end the war.

Kelvin Wong, senior market analyst at OANDA, said gold was being weighed down by expectations of another Federal Reserve rate hike as early as the first quarter of next year.

“After yesterday’s skirmish, that temporary ceasefire agreement between U.S. and Iran is on shaky ground right now, so things could turn pretty fluid again,” he said.

Markets are now pricing in a 68% chance of a Federal Reserve rate hike in September and an 87% chance of an increase in January 2027, according to the CME FedWatch tool.

Concerns over inflation had also risen at the US central bank’s meeting last month, where officials followed Federal Reserve Chairman Kevin Warsh’s lead in adopting a more concise policy statement despite worries that price increases were broadening and could require rate hikes.

Gold is generally seen as a hedge against inflation, but higher interest rates reduce its appeal because it does not offer a yield.

Bank of America said it was cutting its 2026 average gold forecast by 14% to $4,360 an ounce, citing a more hawkish Federal Reserve.

Among other precious metals, spot silver fell 0.5% to $57.98 per ounce.

Platinum rose 1.1% to $1,595.51, while palladium gained 0.9% to $1,224.12.