Gold slides 2.1% to $4,043 on Fed rate hike bets, inflation fears

Gold fell 2.1% to $4,043.14 an ounce as rising energy prices fueled inflation concerns and strengthened bets on further Federal Reserve rate hikes.

The decline accelerated after data showed US initial jobless claims fell to 187,000 last week, well below the 211,000 forecast, reinforcing expectations the central bank will maintain tighter policy for longer, according to Labor Department figures.

Spot gold dropped from a two-week high reached Wednesday, with the dollar hitting a new 40-year high against the yen. Brent crude surged 7% to $100.69 a barrel — its highest close since May — after Yemen's Houthis claimed attacks on two Saudi oil tankers in the Red Sea, adding to supply disruptions from the near-shutdown of the Strait of Hormuz.

Gold at $4,043 is about 3% below its all-time high and faces headwinds from a hawkish Fed repricing. Markets now see a higher probability of rate hikes this year as the US-Iran conflict and Trump's tariff policies sustain inflationary pressure. The next catalyst is the July 30 FOMC decision.

The European Central Bank held its deposit rate at 2.25% on Thursday, noting it is "closely monitoring the intensity and duration of the shock" from the Middle East conflict, according to its statement. The ECB raised rates for the first time in nearly three years in June but has since signaled patience.

Gold's decline was broad-based across precious metals. The dollar index strengthened as the greenback's safe-haven status and lower vulnerability to energy shocks reinforced demand at the expense of the euro and yen. US equities also fell, with the Nasdaq dropping 2.15% and the S&P 500 losing 1.21%, as rising oil prices fueled inflation fears and pushed bond yields higher.

Trump's tariff policies have added to inflation expectations, with the US collecting a temporary 10% global tariff that the White House is reportedly seeking to raise to 15%. The combination of trade policy uncertainty and energy-driven inflation has pushed rate hike expectations higher, reducing the appeal of non-yielding assets like gold.

This article is for informational purposes only and does not constitute investment advice.