Gold prices remained under pressure on Wednesday, trading below the $4,500 per ounce mark after suffering nearly a 2% decline in the previous session, as escalating tensions between the United States and Iran heightened inflation concerns and strengthened expectations of prolonged high interest rates.
Spot gold traded around $4,481 per ounce, hovering near a one-and-a-half-month low, while US gold futures also extended losses amid rising Treasury yields and a stronger dollar.
Market sentiment was rattled after US President Donald Trump warned that Washington could resume strikes on Iran within “two or three days” if Tehran refuses proposed peace conditions. The comments followed earlier indications that Trump had suspended a planned attack after appeals from Gulf allies to allow diplomacy more time.
The ongoing conflict has continued to disrupt shipping activity through the Strait of Hormuz, a critical global oil transit route, pushing oil prices higher and intensifying concerns about imported inflation across major economies.
Higher energy prices have complicated the outlook for the US Federal Reserve, with traders increasingly scaling back expectations for rate cuts in 2026. Some analysts now believe the Fed could even consider another rate hike before year-end if inflationary pressures persist.
Typically viewed as a safe-haven asset during geopolitical crises, gold has struggled to gain momentum in recent weeks as elevated bond yields and a stronger US dollar reduced the appeal of non-interest-bearing assets. Analysts say investors are increasingly prioritising yield-bearing dollar assets over bullion amid uncertainty surrounding the duration and economic impact of the Middle East conflict.
Despite the recent decline, gold prices remain roughly 35% higher than a year ago, underpinned by continued central bank demand, geopolitical uncertainty, and long-term concerns over global inflation and financial stability.
