Gold Prices Fall as Hawkish Fed Signals Strengthen U.S. Dollar
Gold Extends Losses Amid Rising Rate Hike Expectations
Gold prices declined on Thursday as investors reacted to hawkish signals from the U.S. Federal Reserve, while a stronger U.S. dollar continued to weigh on the precious metal. At the same time, a temporary ceasefire agreement between the United States and Iran helped ease inflation concerns and reduced support for safe-haven assets.
Spot gold fell 0.8% to $4,225.39 per ounce by 1:30 p.m. U.S. time. The precious metal had already touched its lowest level since November 2025 earlier this month.
Meanwhile, U.S. gold futures settled 3.1% lower at $4,245.90 per ounce.
Hawkish Federal Reserve Boosts Dollar
According to Peter Grant, Vice President and Senior Metals Strategist at Zaner Metals, the Federal Reserve’s hawkish stance remains the primary driver behind gold’s weakness.
“The most significant factor is the Fed’s hawkish bias. It has pushed the U.S. dollar to new yearly highs and continues to pressure gold prices,” Grant said.
The Federal Reserve left interest rates unchanged on Wednesday, but nine of its 19 policymakers indicated that at least one additional rate hike could be necessary before the end of 2026.
Following the policy announcement, the U.S. dollar strengthened sharply and reached its highest level in more than a year on Thursday. A stronger dollar makes gold more expensive for international buyers, reducing global demand for the metal.
Market participants now see an 85% probability of a U.S. interest rate increase in December, according to CME FedWatch data. This marks a significant jump from the 61% probability recorded before the Fed’s latest policy statement.
Higher Interest Rates Challenge Gold Demand
Gold, a non-yielding asset, typically struggles in an environment of elevated interest rates because investors can earn higher returns from interest-bearing assets.
Since the outbreak of tensions in the Middle East, gold has also faced additional pressure as rising fuel costs fueled inflation concerns and influenced expectations for tighter monetary policy.
U.S.-Iran Ceasefire Eases Safe-Haven Demand
On the geopolitical front, the United States and Iran released the text of a temporary agreement signed by their leaders to end the conflict on Wednesday.
However, uncertainty remains after U.S. President Donald Trump warned that military action could resume if Iran fails to comply with the terms of the agreement.
The ceasefire has contributed to a sharp decline in oil prices, reducing immediate concerns over supply disruptions and inflation.
In the energy market, Brent crude futures fell to their lowest level since March 2, the first trading day following the initial U.S.-Israel strikes on Iran. U.S. West Texas Intermediate (WTI) crude also dropped to its lowest level since March 4.
Silver, Platinum, and Palladium Also Decline
Other precious metals followed gold lower during Thursday’s session.
Spot silver fell 3% to $65.96 per ounce, platinum declined 1.9% to $1,703.94 per ounce, and palladium dropped 2.2% to $1,285.96 per ounce.
Gold Outlook
Gold prices remain under pressure as investors reassess expectations for U.S. monetary policy and monitor developments surrounding the U.S.-Iran ceasefire. With the Federal Reserve maintaining a hawkish outlook and the U.S. dollar trading near multi-year highs, the precious metal could continue facing downside risks in the near term.