XAU/USD drops 1.43% to $4,390 as Middle East tensions lift oil prices and stoke Fed rate hike expectations.
Gold (XAU/USD) fell 1.43% to $4,390 in European trading Thursday, nearing a two-month low of $4,366.56. The decline comes despite heightened Middle East tensions after Iran’s IRGC targeted US military bases, typically a bullish catalyst for safe-haven assets.
The drop reflects concerns over rising energy prices, which have fueled US inflation fears. April’s CPI hit 3.8% YoY, the highest in nearly three years, prompting traders to scale back dovish Fed bets. Markets now price a 43.1% chance of unchanged rates this year, with the remainder favoring at least one hike.
Higher yields on interest-bearing assets have reduced gold’s appeal, as the metal offers no yield. The shift in Fed expectations marks a sharp reversal from earlier projections of two rate cuts this year.