Gold prices edged higher during Thursday's Asian session, recovering modestly from seven-month lows, although the precious metal remained under pressure as investors assessed elevated United States inflation and escalating hostilities in the Middle East.
By 4:00 pm AEST (6:00 am GMT), spot gold was up 0.4% at US$4,088.75 an ounce after falling sharply in recent sessions.
Despite the rebound, sentiment towards the precious metal remained fragile following stronger-than-expected U.S. inflation data and a renewed escalation in military conflict between the United States and Iran.
The U.S. military launched another round of strikes against Iranian targets overnight, while President Donald Trump warned that further attacks would follow if Tehran failed to agree to a peace deal.
Tehran also announced the complete closure of the Strait of Hormuz and claimed that two vessels operating in the strategic waterway had been targeted.
Meanwhile, regional tensions broadened after Israel's Home Front Command issued an early warning following reported launches from Lebanon towards northern Israel.
The renewed escalation has cast doubt over the durability of the ceasefire reached earlier this year and has supported demand for the U.S. dollar, limiting gold's ability to stage a meaningful recovery despite heightened geopolitical uncertainty.
Meanwhile, data released on Wednesday showed that the U.S. consumer price index (CPI) accelerated to 4.2% in May, the highest level since April 2023.
The stronger headline reading strengthened market expectations that the Federal Reserve could raise interest rates by 25 basis points before the end of the year.
Investors largely overlooked softer underlying inflation data. Core consumer prices, which exclude food and energy costs, increased by 0.2% month-on-month in May, below market expectations and slower than the pace recorded in April.
Market attention now turns to the release of the U.S. producer price index (PPI), which is expected to provide additional insight into inflation trends and the likely direction of Federal Reserve policy.
