Gold prices extended their recent decline after renewed military action between the United States and Iran undermined hopes for a swift end to the conflict, increasing uncertainty across global markets and reinforcing concerns about inflation.
Spot gold dropped 2% during morning trading to $4,168 an ounce, its lowest level since late November 2025, following a 1.6% decline in the previous session. Meanwhile, the August gold futures contract fell to $4,188 an ounce.
Middle East Conflict Continues to Influence Markets
The latest escalation in the Middle East has cast doubt over fragile diplomatic efforts and raised concerns that disruptions to energy supplies could persist.
Particular attention remains focused on the Strait of Hormuz, a critical route for global energy shipments, which has remained largely inaccessible amid the conflict.
Iranian Foreign Minister Abbas Araghchi warned on social media that the country “will not leave any attack or threat unanswered.”
Shortly afterwards, Iran launched a drone attack targeting the U.S. Fifth Fleet in Bahrain, according to reports from state broadcaster IRIB News.
Rising Oil Prices Add to Inflation Concerns
The renewed tensions initially pushed oil prices higher, intensifying fears that elevated energy costs could fuel inflation worldwide.
Brent crude climbed more than 2% to above $93 per barrel before retreating toward $91.50 after Washington announced the conclusion of its limited retaliatory operation.
The rebound in oil prices has strengthened expectations that inflationary pressures may remain elevated, prompting investors to reassess the outlook for monetary policy.
Focus Turns to Key U.S. Inflation Report
Gold has come under additional pressure as traders increase bets on tighter monetary policy from the Federal Reserve.
Higher interest rates are generally considered negative for gold because the precious metal does not generate income, making interest-bearing assets relatively more attractive.
Investors are now awaiting the release of U.S. inflation data scheduled for 2:30 p.m. CET, looking for further indications about the Federal Reserve’s next policy move.
Economists expect headline inflation to rise 4.2% year-on-year, marking the highest reading in three years. Core inflation, which excludes food and energy prices, is forecast to increase 0.3% month-on-month and 2.9% annually, its strongest pace since September 2025.
“The detail that matters, however, is not just the aggregate number,” according to Gabriel Debach, market analyst at eToro, but “the composition of the report will be crucial: a rise mainly driven by energy would be seen as temporary, while broader pressure on core services would have much more significant implications for monetary policy.”
Technical Weakness Adds to Selling Pressure
Gold is now trading roughly 20% below the levels seen before the outbreak of the Iran conflict in late February.
The recent break below the 200-day moving average, a widely followed indicator of long-term market momentum, has triggered additional selling activity as institutional investors closely monitor that threshold.
“We expect price action to become more vulnerable in the near term,” predicts Suki Cooper, global head of commodity research at Standard Chartered Plc.
If gold continues to weaken, she warned that “were to decline further, additional positions in gold-backed ETFs would become unprofitable, exposing the metal to further downside risk.”
According to Cooper, the next significant technical support area is located near $4,100 an ounce.
While demand in India has softened, China continues to provide support for the market, with local gold premiums remaining stable at less than $10 an ounce.