Gold prices fell in European trading on Thursday to their lowest levels in two months, deepening losses for the third consecutive session under pressure from a stronger US dollar and rising global oil prices, amid escalating military tensions between the United States and Iran in the Strait of Hormuz, threatening the collapse of peace negotiations between the two sides in Doha.

More hawkish comments from several Federal Reserve officials strengthened expectations that US interest rates could be raised at least once this year, as investors await more key economic data on growth and inflation in the United States.

Price Overview

• Gold prices today: Gold prices fell 2.0% to $4,366.68, the lowest level since March 26, from the opening level at $4,456.04, and recorded a high of $4,466.58.

• At Wednesday’s settlement, gold prices lost 1.15%, marking the second consecutive daily decline, due to the stronger US dollar amid aggressive comments from Federal Reserve officials.

US dollar

The dollar index jumped more than 0.3% on Thursday, extending gains for the third consecutive session and recording a seven-week high at 99.54 points, reflecting broad strength in the US currency against a basket of major and minor currencies.

As is well known, a stronger US dollar makes gold bullion priced in the currency less attractive to buyers holding other currencies.

The rise in the US currency comes as investors avoid risk and focus on buying the dollar as the preferred safe-haven investment due to escalating military tensions between the United States and Iran in the Strait of Hormuz, threatening the collapse of the peace negotiations in Doha.

Global oil prices

Global oil prices rose by more than 3% on Thursday after the US military carried out new strikes targeting military sites inside Iran, prompting Iran’s Revolutionary Guard to suspend the passage of oil tankers through the Strait of Hormuz.

Latest developments in the Iranian war

• The United States launched new strikes on Iran targeting a military site and missile launch platforms.

• A US official said the American military carried out strikes on an Iranian military site that posed a threat to US forces and navigation in Hormuz.

• The US official described the military operation as calculated and defensive.

• Iran’s Revolutionary Guard said it targeted a US base that served as a launch point for attacks near Bandar Abbas.

• Iranian television reported that four vessels were forced to turn back after attempting to cross the Strait of Hormuz without coordination with Iranian forces.

• Tasnim News Agency said a US tanker attempting to cross the Strait of Hormuz was forced to stop and turn back.

• Kuwait’s General Staff activated air defense systems after detecting and intercepting hostile missile and drone attacks in the region.

• The escalation of these violations could trigger a severe diplomatic crisis threatening the collapse of the ongoing negotiations in Doha.

• US President Donald Trump rejected Iranian reports claiming an agreement exists.

• Iranian media reported that the agreement would restore shipping traffic through the Strait of Hormuz.

• Trump denied the existence of any agreement regarding the Strait of Hormuz with Iran and Oman.

• Iran insists on easing economic sanctions and preserving its nuclear rights, while the two sides remain far apart.

• The US Treasury Department imposed sanctions on the Iranian authority established to manage shipping traffic through the strait.

US interest rates

• Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, said fighting inflation remains the priority, as the labor market is “in a good place.”

• Austan Goolsbee, President of the Federal Reserve Bank of Chicago, said energy inflation is proving more persistent than expected.

• According to the CME Group’s FedWatch tool, markets are currently pricing in a 54% probability that the Federal Reserve will raise interest rates in December, compared to just over 16% at the beginning of May.

• Markets are currently pricing a 99% probability that US interest rates will remain unchanged at the June meeting, while the probability of a 25 basis point rate hike stands at 1%.

• Investors will later today monitor US first-quarter economic growth data, in addition to the April personal consumption expenditures report, in order to reassess those expectations.

Gold outlook

Peter Grant, vice president and senior metals strategist at Zaner Metals, said: “The Middle East remains the biggest driver. There was still some lingering optimism, but as this situation continues, that optimism is fading.”

Grant added that the ongoing conflict in the Middle East is driving global oil prices higher and increasing inflation concerns, which negatively impacts gold prices and other non-yielding assets.

SPDR Fund

Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, remained virtually unchanged on Wednesday for the third consecutive session, keeping total holdings at 1,034.85 metric tons, the lowest level since May 8.

The Japanese yen declined in Asian trading on Thursday against a basket of major and minor currencies, deepening its losses for the third consecutive session against the US dollar and hitting its weakest level in four weeks, amid rising demand for the US currency as a safe haven due to escalating military tensions between the United States and Iran, raising fears that the ongoing peace negotiations in Doha could stall or collapse.

As the yen continues to weaken, it is nearing the loss of trading above the ¥160 threshold, which is considered a key level for intervention by Japanese monetary authorities to support the local currency and curb excessive movements in the foreign exchange market.

Price Overview

• Japanese yen exchange rate today: The dollar rose against the yen by 0.1% to ¥159.65, the highest level since April 29, from today’s opening level at ¥159.50, and recorded a low of ¥159.42.

• The yen ended Wednesday’s trading down 0.15% against the dollar, marking its second consecutive daily loss, following hawkish comments from several Federal Reserve officials.

US dollar

The dollar index jumped more than 0.3% on Thursday, extending gains for the third consecutive session and recording a seven-week high at 99.54 points, reflecting broad strength in the US currency against a basket of global currencies.

The rally comes amid investor risk aversion and growing demand for the US dollar as the preferred safe-haven investment, due to escalating military tensions between the United States and Iran in the Strait of Hormuz, threatening the collapse of the peace negotiations in Doha.

Global oil prices

Global oil prices rose more than 3% on Thursday after the US military carried out new strikes targeting military sites inside Iran, prompting Iran’s Revolutionary Guard to suspend the passage of oil tankers through the Strait of Hormuz.

Latest developments in the Iranian war

• The United States launched new strikes on Iran targeting a military site and missile launch platforms.

• A US official said the American military carried out strikes on an Iranian military site that posed a threat to US forces and navigation in Hormuz.

• The US official described the military operation as calculated and defensive.

• Iran’s Revolutionary Guard said it targeted a US base that served as a launch point for attacks near Bandar Abbas.

• Iranian television reported that four vessels were forced to turn back after attempting to cross the Strait of Hormuz without coordination with Iranian forces.

• Tasnim News Agency said a US tanker attempting to cross the Strait of Hormuz was forced to stop and turn back.

• Kuwait’s General Staff activated air defense systems after detecting and intercepting hostile missile and drone attacks in the region.

• The escalation of these violations could trigger a severe diplomatic crisis threatening the collapse of the ongoing negotiations in Doha.

• US President Donald Trump rejected Iranian reports claiming an agreement exists.

• Iranian media reported that the agreement would restore shipping traffic through the Strait of Hormuz.

• Trump denied the existence of any agreement regarding the Strait of Hormuz with Iran and Oman.

• Iran insists on easing economic sanctions and preserving its nuclear rights, while the two sides remain far apart.

• The US Treasury Department imposed sanctions on the Iranian authority established to manage shipping traffic through the strait.

The ¥160 threshold

Japanese authorities are closely monitoring movements in the local currency in the foreign exchange market, particularly as the yen weakens toward the critical ¥160 per dollar level, which has been viewed as a threshold that could prompt renewed market intervention.

Sources told Reuters that Tokyo intervened several times in late April and early May to halt the yen’s decline, although the currency’s recovery did not last long. At the time, the exchange rate reached ¥159.25 per US dollar, its weakest level since April 30.

Outlook for the Japanese yen

• Tony Sycamore, market analyst at IG, said previous intervention by the Bank of Japan had provided policymakers with some relief, but questions remain about its long-term effectiveness.

• Sycamore added: “The key question is whether that intervention was worthwhile for what was essentially only a temporary one-month reprieve. Moreover, will authorities have the capacity to provide similar financial support if the ¥160 level is breached again in coming sessions?”

The Japanese yen weakened to its lowest level against the US dollar since late April during Wednesday’s trading, approaching levels that previously prompted Japanese authorities to intervene in the currency market last month, as traders cautiously assessed the risk of renewed escalation in the war with Iran.

Meanwhile, the New Zealand dollar was among the day’s strongest-performing currencies after surging when the Reserve Bank of New Zealand unexpectedly moved closer to raising interest rates and signaled that tightening could come sooner and at a faster pace than previously expected.

The US dollar, viewed as a safe-haven currency, stabilized after posting modest gains against major currencies in the previous session, as US strikes on Iran reduced optimism over a near-term end to hostilities and the reopening of the vital shipping route through the Strait of Hormuz.

US Secretary of State Marco Rubio said negotiations on an agreement to end the conflict could “take a few days.”

The yen traded at ¥159.45 per dollar, its weakest level since April 30, when Japanese authorities intervened in the market to buy the currency. Many traders consider the ¥160 per dollar level a threshold that could trigger renewed intervention by Japanese authorities, as happened last month when the yen moved beyond that level.

Lee Hardman, currency strategist at MUFG Bank, said: “Markets are clearly leaning toward optimism about the possibility of an agreement regarding Iran, and that has contributed this week to weakening the dollar and lowering bond yields.”

He added: “The surprise is that the yen remains weak. Falling energy prices and lower US Treasury yields would normally reduce the dollar’s gains against the yen, but that has not happened so far.”

Bank of Japan Governor Kazuo Ueda adopted a more hawkish tone, warning that the oil price shock resulting from the war could become persistent amid rising inflation expectations and stronger wage growth.

Data from LSEG showed that markets are currently pricing in a 70% probability that the Bank of Japan will raise interest rates by a quarter percentage point at its next meeting on June 15-16.

The dollar index, which measures the US currency against the yen and five other major currencies, was steady at 99.08 points after rising 0.15% in the previous session.

The euro edged slightly higher to $1.1644, while the British pound remained stable at $1.3446.

The New Zealand dollar jumped 0.6% to $0.587, recovering losses from Tuesday when it had fallen by the same percentage.

The Reserve Bank of New Zealand left its official cash rate unchanged in a split decision, with three members voting for a quarter-point rate hike while three others favored keeping rates steady. Governor Anna Breman cast the deciding vote.

The bank said in its statement: “Overall, the official cash rate is likely to need to rise sooner and by more than indicated in the February monetary policy statement.”

Kelly Eckhold, chief economist at Westpac New Zealand, said: “The governor appears to prefer waiting until there is clearer evidence of rising underlying inflation before taking action.”

He added: “The debate is still ongoing over whether the first rate hike will come in July or September.”

In Australia, the Australian dollar fell 0.4% to $0.714, surrendering earlier gains after data showed annual inflation slowed to 4.2% in April from 4.6% in March, below analysts’ expectations of 4.4%.

That followed weak labor market data last week, prompting traders to price in limited interest rate increases for the remainder of the year, totaling no more than 20 basis points.

Gold prices rose in European trading on Wednesday, moving back into positive territory, supported by a weaker US dollar and declining oil prices, as investors monitored signs of progress in peace negotiations between the United States and Iran.

Lower oil prices are easing inflation concerns in the United States, reducing pressure on Federal Reserve policymakers and lowering the probability of additional US interest rate hikes before the end of this year.

Price Overview

• Gold prices today: Gold prices rose 0.45% to $4,527.97, from the opening level at $4,507.98, and recorded a low of $4,485.94.

• At Tuesday’s settlement, gold prices lost 1.4%, marking the third loss in the past four sessions, following US strikes on Iran.

US dollar

The dollar index fell 0.1% on Wednesday, heading toward its second loss in the past three sessions, reflecting weaker performance of the US currency against a basket of global currencies.

The decline comes as investors maintain optimism over continued progress in peace talks between the United States and Iran amid intensive diplomatic efforts to resolve the remaining points of disagreement between the two sides.

Global oil prices

Global oil prices fell by more than 2% on Wednesday, resuming losses that had temporarily paused yesterday and moving back near five-week lows amid hopes that the Strait of Hormuz could reopen to oil tankers.

Latest developments in the Iranian war

• Iran said the latest US strikes violate the ceasefire agreement.

• A possible preliminary agreement to permanently end the war could pave the way for further negotiations.

• US Secretary of State Marco Rubio said an agreement with Iran could take a few days.

• Both sides had previously indicated progress toward a preliminary agreement to end hostilities and resume shipping through the strait.

US interest rates

• According to the CME Group’s FedWatch tool, markets are currently pricing in a 56% probability that the Federal Reserve will raise interest rates in December, compared to just over 16% at the beginning of May.

• Markets are currently pricing a 99% probability that US interest rates will remain unchanged at the June meeting, while the probability of a 25 basis point rate hike stands at 1%.

• Investors are closely monitoring additional US economic data, along with comments from Federal Reserve officials, in order to reassess those expectations.

Gold outlook

Market strategist Ilya Spivak said: “The broader trend appears bearish, but we are seeing extended periods of consolidation, and I believe that is what we are witnessing today.”

Spivak added that inflation risks and bond market volatility have become so significant that they have shifted attention away from gold’s yield dynamics, meaning gold prices could fall to between $3,700 and $3,800 by the end of the year if the current trend continues.

SPDR Fund

Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, remained virtually unchanged on Tuesday for the second consecutive session, keeping total holdings at 1,034.85 metric tons, the lowest level since May 8.