Gold prices extended their losses on Wednesday, continuing the downward trend seen over the past several days. After Asian markets opened, the price of gold fell by more than 1%, bringing it close to $4,050 per ounce.
The decline pushed gold to its lowest level in nearly two weeks. Analysts say expectations of higher interest rates in the United States have strengthened the US dollar. As a result, gold has come under significant pressure.
Meanwhile, traders continue to monitor developments between the United States and Iran. Recent disagreements between the two countries over Iran’s nuclear program have increased uncertainty in global markets.
US President Donald Trump said Iran had agreed to allow inspections of its nuclear facilities by the International Atomic Energy Agency. However, Iranian officials rejected the claim and insisted that no such agreement had been reached.
In addition, the two sides remain divided over the release of frozen Iranian funds. Consequently, concerns have grown that ongoing disputes could threaten efforts to reach a broader peace agreement.
Ilya Spivak, an analyst at Tastylive, said the pressure on gold reflects market reactions to recent developments involving Iran. He added that rising inflation expectations have increased forecasts for further interest rate hikes by the US Federal Reserve.
According to Spivak, higher inflation has pushed down US Treasury bond prices. At the same time, yields on those bonds have moved higher. Therefore, investors have shifted toward dollar-based assets, boosting the US dollar and weakening gold prices.
Since the start of the Iran conflict, gold has lost around 23% of its value. Although investors often view gold as a hedge against inflation, higher interest rates usually reduce its appeal.
Market surveys show that investors previously expected only one rate increase. However, many now expect as many as three interest rate hikes this year.
Looking ahead, traders are waiting for US inflation and consumer price data due on Thursday. These figures could have a major impact on gold prices.
Spivak warned that stronger-than-expected inflation data could push gold below the $4,000 level. If that happens, prices could fall toward $3,800. Afterward, analysts may begin watching the $3,500 level as the next major support zone.
