Gold Sways as Fed’s Hawkish Minutes and Teetering Iran Talks Pull in Opposite Directions

Gold slips as FOMC minutes reveal potential rate hike, but fragile Iran talks cap losses. Key support at $4,456; resistance at $4,645.

Gold traders are navigating a market tugged between two powerful forces: a Federal Reserve increasingly inclined to raise rates further and fragile hopes of a diplomatic breakthrough in the Middle East. The spot price slipped to $4,507 an ounce on Thursday, down roughly one percent, though June futures managed a modest 0.2% gain to $4,543.96.

The trigger for the pullback came from the release of the FOMC minutes from April’s meeting. Several policymakers are bracing for another rate increase, citing stubbornly high inflation that has been exacerbated by elevated oil prices linked to the Iran conflict. The probability of a rate move by December now sits above 50%, according to the CME FedWatch Tool, a level that casts a long shadow over non-yielding assets like gold.

Bond markets wasted no time repricing. The yield on the ten-year US Treasury surged to nearly 4.6%, while short-term rates hit their highest levels in over a year. As the opportunity cost of holding gold rises, the metal’s appeal diminishes — a dynamic that capped any upside from geopolitical uncertainty.

Adding to the headwinds, Europe’s economic engine is sputtering. The eurozone’s purchasing managers’ index slumped to a 31-month low in May, with services activity particularly weak. Germany’s Bundesbank expects stagnation in the current quarter, and the European Commission has slashed its full-year growth forecast to a meagre 1.1%. High energy costs continue to weigh on consumer spending, dampening the outlook for the broader region.

On the technical front, traders are eyeing a support level at $4,456. A break below that could accelerate selling, while resistance at $4,645 caps any rally.

The geopolitical picture remains a two-edged sword. US negotiators describe talks with Iran as being in a “final phase,” and three supertankers recently passed through the Strait of Hormuz without incident — a small sign of easing tensions. But the situation is brittle: former President Trump has threatened military strikes if diplomacy fails, and Tehran is adamant it will not export highly enriched uranium. For now, any prospect of a deal dampens safe-haven demand, but a collapse would quickly reverse that calculus.

Institutional investors are treading carefully. Holdings in the SPDR Gold Trust slipped by 0.2% to 1,041.74 tonnes — no panic selling, but no fresh accumulation either.

The broader precious metals complex reflected the mixed mood. Silver dropped over 1% to $75.96, while platinum eased 0.2% to $1,947.37 and palladium edged down 0.1% to $1,368.75. Oil recovered slightly, supported by a 7.9 million barrel drawdown in US inventories, adding another layer of complexity to the inflation outlook.

Gold remains caught between a hawkish Fed and a fragile diplomatic process. A clear resolution in either direction would break the current stalemate; until then, the metal is likely to oscillate in a narrow range, with each data point and headline shifting the balance.