Gold prices edged lower during Wednesday’s Asian trading session as a firmer United States dollar and rising expectations for further Federal Reserve tightening weighed on the precious metal.
By 3:55 pm AEST (5:55 am GMT), spot gold was down 0.2% at US$4,472.42 per ounce, hovering near its lowest levels since 30 March.
The U.S. dollar index (DXY) remained supported near a six-week high amid persistent geopolitical tensions in the Middle East and growing expectations that the Federal Reserve may need to keep interest rates higher for longer.
U.S. President Donald Trump said on Tuesday that the United States may need to strike Iran again if a deal is not reached, adding he had been “an hour away” from ordering an attack before delaying the decision following requests from Gulf leaders.
At the same time, U.S. Vice President JD Vance said Washington and Tehran had made significant progress in negotiations and that neither side wanted to see a resumption of military action.
Despite those comments, uncertainty surrounding a potential diplomatic resolution between the U.S. and Iran continues to linger, particularly over Tehran’s nuclear program and access through the Strait of Hormuz.
The ongoing geopolitical uncertainty has helped support demand for the U.S. dollar as a global reserve currency, creating additional pressure on non-yielding assets such as gold.
Meanwhile, elevated crude oil prices linked to the Middle East conflict have fuelled concerns that inflation pressures could intensify again, prompting markets to increase expectations for future Federal Reserve rate hikes.
According to the CME Group FedWatch Tool, traders are now pricing in a 40.9% probability that the U.S. central bank will raise interest rates by 25 basis points (bps) in 2026, and a 14.3% chance of a 50bp hike.
Investors are now closely watching for the release of minutes from the Federal Open Market Committee’s (FOMC) latest policy meeting later in the North American session for additional clues on the future direction of U.S. interest rates.
Further developments surrounding the Middle East conflict are also expected to remain a key driver for precious metals markets in the near term.
