Gold prices edged lower on Thursday as a stronger US Dollar continued to weigh on the precious metal following renewed military tensions between the United States and Iran. Escalating geopolitical risks have fueled concerns over persistent inflation, reinforcing expectations that interest rates could remain elevated for longer.
Meanwhile, the minutes from the Federal Reserve's June policy meeting provided little support for gold, revealing that policymakers remain divided over whether additional interest rate hikes will be necessary this year.
Spot gold fell 0.2% to $4,070.81 per troy ounce, while gold futures slipped 0.1% to $4,079.47 per ounce as of 09:46 GMT.
Gold has now posted losses for three consecutive sessions after renewed US-Iran military activity pushed crude oil prices sharply higher. Rising energy costs have intensified concerns that inflation could remain stubbornly high, prompting investors to expect the Federal Reserve to maintain restrictive monetary policy for an extended period.
The US Dollar benefited from these inflation concerns, with the US Dollar Index remaining close to the 13-month high reached in June.
"Any sustained recovery in energy prices would reinforce expectations that the Federal Reserve may keep interest rates higher for longer to combat persistent inflation," ANZ analysts said in a research note.
Military tensions escalated earlier this week after the United States launched a series of strikes against Iran. President Donald Trump also declared that the ceasefire with Iran had ended, following Iranian attacks targeting vessels attempting to pass through the Strait of Hormuz.
Other precious metals also traded mostly lower, extending recent declines alongside gold. Spot silver dropped 0.5% to $58.0060 per ounce, while spot platinum gained 0.5% to $1,594.00 per ounce.
Fed Minutes Highlight Inflation Concerns
The Federal Reserve's June meeting minutes, released on Wednesday, suggested that policymakers remain divided over the need for additional interest rate increases in 2026. While opinions differed on the policy outlook, officials broadly acknowledged that inflation remains a significant challenge.
The minutes also revealed growing concern among Fed officials that persistent inflationary pressures could eventually justify another rate hike later this year, particularly if price growth shows little sign of easing.
US inflation has accelerated noticeably since the outbreak of the US-Iran conflict in late February, with consumer prices continuing to run well above the Federal Reserve's long-term 2% inflation target.
Federal Reserve Chair Kevin Warsh recently reiterated the central bank's commitment to restoring inflation to its target, emphasizing that policymakers remain prepared to keep monetary policy restrictive until inflation returns to sustainable levels.