Gold prices rose sharply on Thursday as heightened geopolitical tensions in the Middle East, coupled with a weaker U.S. dollar and soft inflation data, drove investors toward safe-haven assets. Market expectations of a Federal Reserve interest rate cut in the coming months have further boosted sentiment for the precious metal.
In early trading, spot gold gained 0.7% to reach $3,375.06 per ounce, while U.S. gold futures surged by 1.5% to $3,395 per ounce.
In the Indian domestic market, gold prices followed the global rally. According to data from Goodreturns, 24-karat gold reached ₹99,280 per 10 grams, while 22K and 18K gold were priced at ₹91,000 and ₹74,460 per 10 grams, respectively—reflecting robust retail demand and international tailwinds.
Softer U.S. Inflation and a Weak Dollar Provide Tailwind
Much of gold’s recent strength is tied to economic data from the United States. The Consumer Price Index (CPI) for May increased by just 0.1%, falling short of the 0.2% rise forecasted by economists. On a year-over-year basis, inflation came in at 2.5%, reinforcing expectations that the U.S. Federal Reserve may soon shift to a more accommodative policy stance.
The dollar index fell to its lowest level in two months following the release of the CPI data. A weaker dollar typically supports gold by making it cheaper for holders of other currencies.
“The market is currently pricing in a 68% chance of a Fed rate cut in September,” said Manav Modi, Senior Analyst at Motilal Oswal Financial Services. “This prospect of lower interest rates has increased investor appetite for gold, which does not yield interest but gains appeal during periods of monetary easing.”
Geopolitical Tensions Amplify Safe-Haven Demand
Geopolitical developments in the Middle East have also added fuel to the rally. U.S. President Donald Trump announced a strategic drawdown of American military personnel from the region amid escalating tensions with Iran. The announcement comes at a time when intelligence signals indicate that Israel may be preparing for potential military action, creating fresh uncertainty in the region.
Investors, already wary of fragile global relations, reacted by increasing allocations to gold, a traditional safe-haven asset during times of geopolitical and financial instability.
Aksha Kamboj, Vice President of the India Bullion and Jewellers Association, commented on the rising demand: “Concerns over the U.S.-Iran standoff and unresolved aspects of the U.S.-China trade negotiations have significantly boosted gold buying. Additionally, central banks continue to add to their gold reserves, underlining its role as a strategic asset in uncertain times.”
Central bank gold buying has remained a key trend over the past few years, with several emerging economies increasing their reserves in a move seen as a hedge against dollar exposure and currency volatility. This underlying demand is providing structural support for prices, even beyond short-term market events.
Analysts See Room for Further Gains
Looking ahead, analysts believe gold prices are likely to remain firm. The release of the U.S. Producer Price Index (PPI), scheduled for later today, could provide additional insight into inflationary pressures and influence market expectations for monetary policy. If producer inflation also comes in below forecasts, it could further solidify the case for Fed rate cuts in the near term.
Technical analysts note that gold is approaching key resistance levels. If prices manage to sustain their current momentum and break above those thresholds, the market may see a fresh leg higher.
“With global risk factors mounting and the Fed potentially preparing to ease policy, the outlook for gold remains bullish in the short term,” said one Mumbai-based commodity strategist. “We are watching closely for confirmation from upcoming U.S. economic indicators and geopolitical developments.”
Investors will also be monitoring signals from central banks, especially in light of growing consensus that major economies may pivot toward easing measures to counter slowing growth.
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