Gold falls to multi‑month low near $4,050 as hot US inflation boosts Fed hawkish bets
- Gold price falls to near $4,050 in Thursday’s early Asian session.
- The US began striking multiple targets in Iran.
- US CPI inflation rose to a three-year high at 4.2% in May.
Gold price (XAU/USD) tumbles to around $4,050, the lowest since November 2025, during the early Asian session on Thursday. The precious metal extends the decline as a hot US inflation report and ongoing tensions in the Middle East fueled expectations for higher-for-longer US Federal Reserve (Fed) interest rates.
US Central Command (CENTCOM) said the US began launching strikes in Iran on Wednesday, adding that the attacks are “in response to Iran’s unwarranted and continued aggression.” This action came after US President Donald Trump stated earlier Wednesday that Washington would hit Iran “very hard” again, escalating his public threats as he pressed Tehran to sign a deal.
Data released by the US Bureau of Labor Statistics (BLS) on Wednesday showed that the US Consumer Price Index (CPI) rose 4.2% YoY in May, compared to 3.8% in April. This figure registered the highest level in three years and came in line with the market expectation.
On a monthly basis, the CPI increased by 0.5%, matching analysts' estimates. The core CPI, which excludes volatile food and energy prices, rose 0.2% and 2.9% on a monthly and yearly basis, respectively.
The Fed is widely expected to hold rates steady at its June policy meeting. But traders expect the US central bank to raise rates by the end of the year in response to higher inflation, according to futures. It’s worth noting that Gold is often used amid geopolitical uncertainty but does not yield interest, making it less attractive when interest rates are high.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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