Gold prices extended their decline on Thursday, remaining near a more than seven-month low as investors reacted to a stronger US dollar and growing expectations that the US Federal Reserve could raise interest rates further this year.
The precious metal continued to face selling pressure after falling below the key $4,000-per-ounce level during the previous session, a threshold it had not breached since November 2025.
Gold Remains Near Seven-Month Low
Spot gold fell 0.4% to $3,985.89 per ounce in early trading, after touching its lowest level in more than seven months on Wednesday.
Meanwhile, US gold futures for August delivery slipped 0.2% to $4,001.60 per ounce, reflecting continued caution among investors ahead of key US economic data.
The latest decline highlights growing concerns that tighter monetary policy in the United States could reduce the appeal of non-yielding assets such as gold.
Strong Dollar Pressures Bullion Market
A major factor behind the recent weakness in gold prices has been the strength of the US dollar.
The dollar climbed for a third consecutive day on Wednesday, reaching its highest level in 13 months. A stronger greenback makes gold more expensive for holders of other currencies, often reducing international demand for the precious metal.
As a result, investors shifted toward the dollar, placing additional downward pressure on bullion prices.
Traders Increase Bets on Fed Rate Hikes
Market expectations regarding Federal Reserve policy have also weighed heavily on gold.
According to market pricing tracked by the CME FedWatch Tool, traders now expect as many as three Federal Reserve interest rate increases this year. Investors are also assigning roughly a 67% probability to a rate hike in September.
Higher interest rates typically reduce the attractiveness of gold because the metal does not offer interest or dividend income. As yields on other assets rise, investors often move funds away from bullion and into interest-bearing investments.
Investors Await Key Inflation Data
Market participants are closely watching upcoming US inflation figures for additional clues about the Federal Reserve’s next policy move.
The US Personal Consumption Expenditures (PCE) Index, the Fed’s preferred measure of inflation, is scheduled for release later in the day.
Economists and investors expect the report to play a crucial role in shaping expectations for future interest rate decisions. Any signs of persistent inflation could strengthen the case for additional rate hikes and potentially place further pressure on gold prices.
US Treasury Secretary Comments on Fed Policy
US Treasury Secretary Scott Bessent also weighed in on monetary policy discussions on Wednesday.
He welcomed Federal Reserve Chair Kevin Warsh’s proposal to reduce the central bank’s use of forward guidance on interest rates. However, Bessent emphasized that policymakers should remain open-minded regarding the potential inflationary effects of the ongoing conflict involving Iran.
His remarks added to market speculation over how geopolitical developments could influence inflation and future monetary policy decisions.
Middle East Developments Remain in Focus
Investors are also monitoring geopolitical developments in the Middle East.
Officials from Lebanon and Israel confirmed discussions regarding a US-backed proposal under which Israeli forces would transfer some territory occupied during the conflict with Hezbollah to the Lebanese military.
The proposal is being viewed as a potential step toward restoring Lebanese control over disputed areas and easing regional tensions.
While geopolitical uncertainty often supports gold prices due to its safe-haven status, current market sentiment remains dominated by monetary policy expectations and currency movements.
Other Precious Metals Show Mixed Performance
The broader precious metals market showed mixed results during Thursday’s trading session.
Spot silver declined 0.2% to $57.33 per ounce, while platinum lost 0.2% to $1,575.85 per ounce.
In contrast, palladium recorded modest gains, rising 0.3% to $1,170.25 per ounce.
Market Outlook
Gold prices remain under pressure as investors assess the outlook for US interest rates and await fresh inflation data. The combination of a stronger dollar, rising Treasury yields, and expectations of additional Federal Reserve tightening has weakened demand for bullion in recent sessions.
Analysts believe upcoming economic indicators, particularly inflation data, will likely determine whether gold can stabilize above current levels or face further declines in the weeks ahead.