Retaliatory U.S. strikes against Iran fuel inflation concerns, pressuring gold as traders price in higher-for-longer Fed rates.
Gold and silver futures fell to year-to-date lows Tuesday after the U.S. launched retaliatory strikes against Iran, escalating geopolitical tensions and stoking fears of persistent inflation. The move complicates expectations for a near-term peace deal and raises the prospect of delayed Fed rate cuts.
Prior to the strikes, gold had already faced headwinds from rising Treasury yields and a stronger U.S. dollar. Analysts at Citigroup lowered near-term gold targets, citing elevated rate hike risks and limited investor risk appetite. Markets now anticipate inflation data could surprise to the upside, further reducing gold’s appeal as a hedge.
The immediate reaction saw gold drop below key support levels, with traders shifting focus to upcoming U.S. economic releases for further direction.