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Gold hits two-month low as US-Iran tensions fuel inflation fears

Shafaq News 2026/05/28 15:13

Shafaq News

Gold prices dropped to atwo-month ‌low on Thursday as inflation fears were stirred up after the U.S.and Iran traded more air strikes, boosting the dollar and crude prices, andfueling expectations of higher interest rates.

Spot gold was down 1.5% at$4,389.99 per ​ounce as of 0902 GMT, earlier falling to its lowest level sinceMarch 26. ​U.S. gold futures for June delivery fell 1.5% to $4,387.70.

The dollar rose to ⁠a one-weekhigh, making greenback-priced bullion more expensive for holders of othercurrencies.

Oil prices jumped ​more than2% after Iran's Revolutionary Guards said they targeted a U.S. airbase inresponse to ​a U.S. attack in the port city of Bandar Abbas.

Bullion has been underpressure since the start of the U.S.-Israeli war with Iran in late February. The effective closure of the Strait of Hormuz has prompted a ​surge in Brentcrude prices, fanning inflation woes and propelling rate hike expectations.

"Gold drops to ​atwo-month low and into bear market territory as fresh U.S.-Iran hostilitiesdouse hopes of a deal. Heightened ‌geopolitical ⁠uncertainty directs risk-offflows to the dollar, just as higher oil prices exacerbate inflationfears," Nikos Tzabouras, a senior market analyst at Jefferies-ownedTradu.com, wrote in a summary.

"Higher-for-longer rateprospects weigh on non-yielding assets, compounding bullion's weakness andleaving it vulnerable to new 2026 lows."

Despite being an ​inflationhedge, non-yielding bullion ​underperforms in high interest ⁠rate environmentsas investors turn to assets like Treasury yields that offer better returns.

Federal Reserve Governor LisaCook on Wednesday said she feels the ​U.S. central bank should hold short-terminterest rates steady for now, ​but, with ⁠tariffs, the Iran war, and a surgein AI-related investment pushing prices higher, she is prepared to hike ratesif needed.

The market awaits the U.S.Personal Consumption Expenditures data, the Fed's preferred inflation gauge,⁠due later ​in the day, for cues on the Fed's monetary ​policy path.

Spot silver fell 1.7% to$73.34 per ounce and platinum lost 1.3% to $1,893.16. Both metals earlier hit anear one-month ​low. Palladium slid 1.8% to $1,366.00.

(Reuters)

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