Gold drops on rate-hike fears as Trump says Iran ceasefire over

Gold dropped as US President Donald Trump said the ceasefire with Iran has ended, stoking concerns that a renewal of fighting could again drive inflation and push up interest rates.

Bullion dropped as much as 1.6% to below $4,050 an ounce, heading for a third daily loss. Speaking at a press conference in Ankara, Trump said he thought the ceasefire with Iran was “over” and a “waste of time.” His comments came after the US launched fresh strikes against Iran and revoked a waiver that allowed the sale of Iranian oil after Iran attacked merchant ships. Oil surged.

Any rebound in energy prices will reinforce expectations that the US Federal Reserve may keep interest rates higher for longer to combat stubborn inflation. Elevated borrowing costs are typically a headwind for gold, which doesn’t pay interest, while a stronger dollar has also made bullion that’s priced in the US currency more expensive.

Swap traders are now pricing the likelihood of a rate hike at the next Fed meeting at more than 30%, up from less than 20% last Thursday.

“Much of the geopolitical premium is already in the price, so renewed tensions are driving position adjustments rather than fresh safe-haven buying,” said Ewa Manthey, commodities strategist at ING Bank N/V. “Going forward, gold’s reaction will depend on how events influence investor positioning, yields and overall market sentiment.”

Gold is down by more than a fifth since the Iran war started in late February, with a wave of profit-taking bringing a three-year bull run to an end and pushing the metal below $4,000 recently. There’s little evidence yet, however, that investors are putting on large-scale short positions in anticipation of further declines.

Traders will also look for rate-path clues when minutes of the Fed’s June meeting are released later Wednesday. Bullion slumped after that meeting, as new Fed Chair Kevin Warsh leaned more hawkish than markets had anticipated, but weaker-than-expected jobs data last week dimmed the likelihood of a near-term rate cut.

“A retest of $4,000 is possible if position unwinding continues,” Manthey said. “But for gold to break meaningfully and sustainably below that level, the market would likely need to see further liquidation, higher real yields and reduced expectations for Fed easing — not just geopolitical headlines.”

Spot gold was 1.3% lower at $4 054.53 an ounce by 11:22 a.m. in London. Silver fell 2% to $58.77 an ounce. Platinum and palladium slid. The Bloomberg Dollar Spot Index edged higher.

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