Gold falls as Fed fears return: can the $4,000 support level hold this time?

Gold fell on Thursday as a fourth day of oil gains forced investors to look beyond cooler US inflation data and reconsider the risk of another Federal Reserve rate rise.

Spot bullion slipped towards $4,035 an ounce in Asian trading, while August futures also eased.

Gold had briefly stabilised above $4,050 earlier in the session, but the rebound faded as Brent crude remained above $85 a barrel.

The metal is struggling to behave like a conventional haven: escalating conflict is supporting defensive demand, yet the resulting energy shock is lifting inflation expectations and the opportunity cost of holding a non-yielding asset.

Oil shock overwhelms haven demand

The US expanded its attacks on Iran, hitting coastal defences, missile facilities and targets further north.

American forces also disabled a tanker they said was attempting to breach a renewed naval blockade. Iran retaliated with missile and drone attacks aimed at Bahrain, Jordan and Kuwait.

Brent’s advance has now stretched to four sessions as traders price the risk of further disruption around the Strait of Hormuz.

The waterway remains central to global energy flows, and Iran’s Revolutionary Guard has threatened broader restrictions on regional oil and gas exports.

Jigar Trivedi at IndusInd Securities said gold’s decline reflected the market’s focus on the inflationary consequences of the fighting rather than its immediate haven appeal.

In that setting, a prolonged rise in crude would matter more for bullion than the latest soft inflation reports.

Softer inflation offers only limited relief

June consumer prices fell 0.4% from May, while producer prices declined 0.3%, their largest drop in 14 months.

Both releases showed that inflation was moderating before the latest surge in energy costs.

That distinction is becoming increasingly important.

The data captured a period when fuel prices were falling and therefore offers little guidance on the impact of the renewed US-Iran conflict.

Fed Governor Lisa Cook said she was prepared to act if disinflation failed to emerge soon.

Chair Kevin Warsh also maintained a firm commitment to returning inflation to the 2% target without signalling the timing of the next policy move.

Traders have reduced expectations for an immediate increase but have not ruled out another rise before year-end.

Gold’s $4,000 floor returns to focus

Gold’s pullback has returned attention to the $4,000 level, which has repeatedly attracted buyers during recent bouts of selling.

A sustained break below that threshold could expose the metal to the $3,950 area, while a recovery above $4,100 would be needed to restore stronger upward momentum.

The wider precious-metals complex also weakened. Silver dropped towards $57 an ounce, while platinum and palladium edged lower.

For now, gold is caught between two competing trades.

Geopolitical uncertainty is keeping haven demand alive, but the oil-driven inflation threat is giving the Fed the stronger influence over prices.