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Gold prices dropped in Asian trade on Thursday as the Federal Reserve’s hawkish stance strengthened the U.S. dollar, putting pressure on bullion prices. Meanwhile, rising geopolitical risks, particularly the potential for U.S. involvement in the Israel-Iran conflict, capped the losses in gold.
- Spot Gold fell 0.5% to $3,353.92 per ounce, while Gold Futures for August declined 1.1% to $3,369.77/oz by 02:15 ET (06:00 GMT).
Geopolitical Uncertainty: Israel-Iran Conflict
The Israel-Iran conflict has intensified as senior U.S. officials prepare for a potential strike on Iran in the coming days, according to Bloomberg. While plans remain fluid, reports suggest that the weekend could be a critical window for action. Iran’s Supreme Leader, Ayatollah Ali Khamenei, rejected President Trump’s calls for unconditional surrender, indicating that neither peace nor war could be imposed on Iran.
Trump has stated that he may or may not strike Iran, keeping markets on edge. While global risk-off sentiment has generally supported gold, the Federal Reserve’s hawkish pause on rate cuts has weighed heavily on the precious metal.
Fed’s Hawkish Pause Pressures Gold Prices
On Wednesday, the Federal Reserve held interest rates steady and paused expectations for further rate cuts later this year, citing inflationary pressures stemming from U.S. trade tariffs. The decision bolstered the dollar, which in turn pressured gold prices. Lower interest rates usually support gold by reducing the opportunity cost of holding non-yielding assets, such as bullion, but the Fed’s cautious tone regarding inflation has limited any upside for gold.
Platinum Hits 10-Year High Amid Supply Concerns
On a positive note for some precious metals, platinum futures hit their highest level since September 2014, driven by a tightening supply and rising demand. Platinum reached over $1,313.0/oz, marking a 0.5% increase, despite a slight pullback in trading.
A bullish report in late May spurred strong buying in platinum, with demand from Chinese jewelry makers and industrial users remaining robust. Low inventories and high lease rates are constraining supply, making platinum an increasingly attractive alternative to gold, especially as investor sentiment shifts.
Broader Metal Prices Decline
Other metal prices also saw declines as the stronger U.S. dollar weighed on demand:
- Silver Futures dropped 1.5% to $36.665 per ounce.
- Copper Futures on the London Metal Exchange fell 0.3% to $9,644.35 per ton, while U.S. Copper Futures dropped 0.7% to $4.8205 per pound.
Conclusion
Gold prices faced downward pressure as the U.S. dollar strengthened following the Fed’s hawkish pause, while geopolitical risks, such as the escalating Israel-Iran conflict, continued to provide a floor for gold prices. However, platinum saw a significant rally, driven by supply concerns and strong demand from industrial and jewelry sectors. Broader metal prices were also lower amid the strength of the greenback. Investors will remain focused on the developments in the Israel-Iran conflict and any further signals from the Federal Reserve regarding monetary policy.
