Gold prices fell to a two-month low on Thursday as renewed U.S. military strikes against Iran boosted the dollar and sent oil prices surging, stoking inflation fears and complicating the interest rate outlook.
Spot gold dropped 1.7% to $4,380.62 per ounce, its lowest since March 26. U.S. gold futures for June delivery fell 1.6% to $4,377.10.
The dollar hit a one-week high, making gold more expensive for overseas buyers.
"Geopolitical tensions remain high, and we've had too many false alarms from peace talks. The U.S. dollar is likely to remain bid, keeping gold under pressure," said Matt Simpson, senior analyst at StoneX.
The U.S. military struck a military site in Iran believed to threaten forces and commercial shipping in the Strait of Hormuz. The attack came hours after President Trump dismissed an Iranian report of a deal to restore traffic through the strategic waterway. Oil prices jumped more than 3%.
Higher crude prices can accelerate inflation, keeping interest rates elevated. While gold is seen as an inflation hedge, higher rates weigh on the non-yielding metal.
Federal Reserve Governor Lisa Cook said Wednesday the central bank should hold rates steady for now, but with tariffs, the Iran conflict, and AI-related investment pushing prices higher, she is prepared to hike if needed.
Investors await U.S. Personal Consumption Expenditures data later today for clues on the Fed's policy path.
Spot silver fell 3% to $72.37, platinum lost 1.4% to $1,890.81, and palladium slid 1.9% to $1,364.26.