Fed officials hint at potential rate increases this year, reducing gold’s appeal despite geopolitical easing between the US and Iran.
Gold prices (XAU/USD) fell to near $4,210 in early Asian trading Friday, extending losses after the Federal Reserve signaled possible rate hikes in 2025. The Fed held rates steady at 3.5%-3.75% during its June meeting but indicated a shift toward tighter policy to combat inflation pressures linked to geopolitical risks.
The central bank’s unanimous decision under new Chair Kevin Warsh marked its first rate announcement since late 2025, when it cut rates by 75 basis points. Warsh emphasized the Fed’s commitment to price stability, warning that inflation remains a persistent challenge despite easing tensions between the US and Iran.
While the US-Iran peace deal and resumed shipping in the Strait of Hormuz provided some support, higher interest rates diminish gold’s attractiveness as a non-yielding asset. Markets now await further Fed guidance on the timing of potential hikes.