Gold’s Safe-Haven Status Falters: Spot Price Slides to $4,022 on Fed Rate Pressure Despite Hormuz Closure

US inflation data overwhelms geopolitical risk, sending gold to six-month low near $4,022. Fed rate hike odds top 70% as oil surges past $93.

The Strait of Hormuz has been closed by Iran, oil has surged past $93 a barrel, and yet gold is trading near a six-month low. The traditional playbook — in which Middle Eastern turmoil sends investors fleeing into the yellow metal — has been torn up. This time, the very factor that usually boosts gold is working against it.

Spot gold was changing hands around $4,077 an ounce on Thursday, barely in positive territory after recovering from a session low of $4,022 — its weakest since March 23. The previous day had been even starker: the precious metal crashed 2.7% to $4,149, bringing its weekly decline to roughly 8% and its year-to-date loss to 4.6%. The relative strength index sank to 25, deep into oversold territory, yet buyers remained hesitant.

Inflation data overwhelms geopolitical risk

The root cause is a hotter-than-expected US inflation print. Consumer prices rose 4.2% in May from a year earlier, the fastest pace in three years. The core gauge, excluding food and energy, came in at 2.9%. Energy was the primary driver: the energy index climbed 3.9% month-on-month and accounted for more than 60% of the overall monthly increase. Housing and food costs also rose, signalling that the inflation pressure is broadening beyond the energy sector.

That data, released on June 10, has recalibrated Federal Reserve expectations. Markets now price in a greater than 70% probability of a rate hike by December. The yield on the 10-year US Treasury note consequently climbed above 4.5%, making non-yielding gold less attractive relative to interest-bearing assets. The dollar firmed in tandem, adding further pressure on the bullion price for non-US buyers.

The oil-inflation feedback loop

The irony is that the same geopolitical event that should be a tailwind for gold is amplifying the headwind. After US strikes on Iranian targets, Tehran retaliated by closing the Strait of Hormuz, sending Brent crude jumping more than $2 to $93.44 a barrel. Higher energy prices feed directly into inflation, which in turn hardens the Fed’s hawkish stance and strengthens the dollar — all four factors pulling gold lower at once.

On Tuesday, a brief easing of tensions and a dip in oil prices had allowed gold to eke out a small gain. Wednesday’s reversal showed just how tightly the metal is now tethered to the energy market. The safe-haven premium simply could not compensate for the rate-hike pressure.

European Central Bank decision adds to the mix

Traders were also eyeing the European Central Bank’s interest-rate decision later on Thursday. Analysts expect the ECB to deliver its first rate increase since September 2023, as eurozone inflation — currently running at 3.2% — demands action. A tighter ECB policy often influences the dollar’s trajectory, adding another variable to gold’s already complex equation.

Later in the US session, the producer price index for May will be released. If those wholesale inflation figures also come in hot, gold could face renewed selling pressure.

Technical levels in focus

Chart watchers have identified the $4,000 mark as the first major support floor. A break below that level would intensify the downward momentum. On the upside, resistance is not seen until $4,367, leaving a wide gap before any meaningful recovery.

Looking ahead, the next critical piece of US inflation data arrives on July 14, when the June consumer price report is due. Until then, gold remains hostage to oil prices, dollar moves, and shifting rate expectations. If energy-driven inflation begins to seep more broadly into core measures, the Federal Reserve will be forced to maintain a prolonged restrictive stance — and the yellow metal’s safe-haven credentials will continue to be tested.