Gold prices extended their decline on Thursday, falling to a two-month low as escalating tensions between the United States and Iran heightened inflation concerns and weakened expectations for global interest rate cuts.
Gold dropped to $4,379.63 per troy ounce, down 1.71% from the previous session, according to trading data tracking the benchmark market for the precious metal. The commodity has now fallen 3.66% over the past month, although it remains nearly 32% higher compared to a year ago.
The latest decline comes as investors react to reports of fresh US strikes on Iranian military targets, a development that has renewed fears of prolonged instability in the Middle East and potential disruptions to global energy supplies.
At the center of the tensions remains the Strait of Hormuz, a critical global oil shipping route that Iran insists on maintaining influence over as part of ongoing negotiations with Washington. Tehran is also pushing to preserve key aspects of its nuclear programme, while US President Donald Trump has maintained a hardline stance, rejecting sanctions relief and warning against what he described as a “bad deal.”
While geopolitical uncertainty would traditionally strengthen demand for gold as a safe-haven asset, markets are instead focusing on the inflationary consequences of rising energy prices.
Oil prices have climbed sharply in recent sessions amid fears of supply disruptions, fueling concerns that inflation could remain elevated for longer across major economies. Analysts say this is strengthening expectations that central banks, particularly the US Federal Reserve, may delay interest rate cuts or maintain tighter monetary policy for longer than previously anticipated.
Higher interest rates tend to reduce the appeal of gold because the metal does not generate interest income, making yield-bearing assets such as bonds more attractive to investors. The stronger US dollar has also added pressure to bullion prices by increasing costs for international buyers.
Despite the recent pullback, gold continues to trade at historically elevated levels after a strong rally earlier in the year driven by geopolitical uncertainty, central bank purchases, and persistent global economic risks.
Market participants are now closely watching developments in US-Iran negotiations, oil price movements, and signals from major central banks for clues on the next direction of gold prices.
