Gold prices declined on Tuesday as fresh U.S. military strikes in Iran drove crude prices higher, intensifying market anxieties over persistent inflation and an extended period of elevated interest rates. Spot gold dropped 0.6% to $4,542.20 per ounce, though U.S. gold futures for June delivery managed a slight 0.4% gain to settle at $4,542.80. The military friction occurred concurrently with diplomatic efforts in Doha, where Iran’s foreign minister and top negotiator met with Qatar’s prime minister to discuss a potential framework to end the three-month-old war. Both Washington and Tehran had previously downplayed the likelihood of an immediate diplomatic breakthrough.
Despite the ongoing negotiations, U.S. forces executed defensive strikes in southern Iran targeting missile launch sites and naval vessels attempting to deploy mines. Market analysts noted that even if a diplomatic resolution is eventually finalized, physical infrastructure damage to Middle East oil production facilities could severely delay the normalization of global crude flows. This structural threat pushed Brent crude futures up 2% in early Asian trade. While bullion traditionally serves as an inflation hedge, the prospect of prolonged high energy costs has fueled expectations of aggressive monetary policy, as higher interest rates increase the opportunity cost of holding non-yielding precious metals. Reflecting this hawkish shift, the CME Group’s FedWatch tool indicated that market pricing now reflects a 56% probability of a Federal Reserve interest rate hike by December. The broader precious metals complex fell in tandem with gold, as spot silver slid 1.6% to $76.84 per ounce, platinum dropped 0.8% to $1,952.56, and palladium decreased 1.2% to $1,381.27.
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