Spot Gold extended gains on Thursday, as heightened US-Iran tensions drove demand for traditional safe-haven assets, while softer US CPI inflation added to expectations of Fed rate cuts.
The US government ordered the departure of embassy personnel from Baghdad after Iran said it might launch an attack on US bases in case negotiations regarding its nuclear program fell through.
Further supporting Gold, the US Dollar Index plunged to a two-month trough. A weaker dollar makes dollar-priced Gold more appealing to international investors holding other currencies.
Meanwhile, US consumer prices saw a modest increase in May, tempered by lower gasoline costs, the latest data by the Labor Department’s Bureau of Labor Statistics showed.
Consumer prices rose 0.1% in May, slowing from a 0.2% gain in April. US annual inflation stood at 2.4% in May, picking up from 2.3% in April.
However, analysts are bracing for stronger inflation readings later in the year, citing knock-on effects from the Trump administration’s import tariffs. While the impact on pricing has been limited so far, this can be attributed to the presence of stock accumulated prior to the levies’ implementation.
Markets are now pricing in 50 basis points of rate cuts by the Federal Reserve by year-end.
Market players now awaited the US producer inflation data print for more cues on macroeconomic conditions and the Federal Reserve’s future policy path.
On the tariff front, US President Donald Trump said on Wednesday that a deal had been struck to revive a truce in the US-China trade war, after US and Chinese officials established a framework on tariff rates.
Spot Gold was last up 0.33% on the day to trade at $3,366.30 per troy ounce.
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