Gold price drops to month-low on rate cut uncertainty

Gold dropped below the $5,000-an-ounce level for the first time in a month amid rising fears of inflation that could derail the Federal Reserve’s rate-cut path.

On Wednesday, spot gold went down by as much as 3% to $4,836 per ounce, its lowest since February 17. US gold futures suffered similar losses. Silver, too, declined by about 3% to below $80 an ounce.

Bullion has traded within a narrow range in recent sessions, as investors weighed the geopolitical risks against the inflationary pressures brought by the Middle East conflict. The yellow metal tends to thrive during times of economic turmoil, but high price levels could force central banks to keep interest rates elevated, taking the appeal out of non-yielding assets.

Inflation worries edge out

As the war dragged on, the inflationary concerns gained the upper hand as supply-chain disruptions in the region continue to send energy prices higher. Since the strike on Iran late last month, gold has now fallen by over 6% after an initial surge above $5,400 — about $200 off its record high set in January.

“Higher energy ​prices due to the continued escalation of the war are fanning the fire of inflation — one ​reason the Federal Reserve may be unable to cut rates, and that is keeping gold prices under pressure,” said David Meger, director of metals trading at High Ridge Futures, told Reuters earlier.

“I don’t think there is a lack ​of safe-haven demand. I just believe that other pressures are overwhelming that demand,” he added.

Bullish views intact

While the Fed is expected to keep rates unchanged at its policy meeting later in the day, investors will scrutinize the US central bank’s stance on inflation and the softer labor market to gauge its monetary policy path.

Despite its recent weakness, gold is still up 15% on the year, extending its blistering rally from 2025.

Analysts, including those from major banks, remain bullish on the metal over the coming months, as inflation (or even stagflation) could eventually steer investors towards gold for its role as a store of value.

Earlier in the year, JPMorgan forecast that gold could reach $6,300 by the end of 2026, while BNP Paribas projected prices to hit at least $6,000. Last week, UBS also set a target of $6,200 per ounce, citing the metal’s performance post geopolitical conflicts throughout history.