Gold Falls to 2-Month Low at $4,400 — US Strikes on Iran Raise Inflation Fears
Gold prices fell sharply on Thursday, dropping below $4,400 per ounce to hit their lowest level in nearly two months. The selloff was triggered by fresh US military strikes on an Iranian military site, which raised doubts about ongoing peace negotiations and kept inflation and interest rate concerns front and center for investors.
What Happened?
According to market reports, the United States launched new strikes targeting Iranian military positions, casting serious doubt on the viability of a peace agreement. Both sides had reportedly been making progress in indirect talks, but the fresh military action sent shockwaves through energy and precious metals markets.
Gold, which had been hovering near $4,500 in recent weeks, broke below key support levels as investors reacted to the news. The precious metal is now down more than 15% from its all-time high of $5,595 set in January 2026.
Strait of Hormuz — The Key Factor
At the heart of the crisis is the Strait of Hormuz, through which approximately 20% of global oil and LNG trade flows. Iranian forces have reportedly been using the strait as leverage in negotiations, and any escalation threatens to keep energy prices elevated.
Brent crude oil is currently trading above $100 per barrel — its highest level since 2022. This has directly impacted fuel prices worldwide, including Pakistan (Rs. 403/litre petrol) and India (₹94.77/litre).
Why Gold Fell — The Inflation Connection
Normally, geopolitical tensions push gold higher as investors seek safe havens. However, the current situation is more complex. Rising oil prices are stoking inflation fears, which in turn could force central banks to maintain or even raise interest rates. Higher interest rates make gold less attractive since it pays no yield.
Federal Reserve officials have maintained a cautious tone. Fed Governor Lisa Cook backed steady rates for now but left room for hikes if inflation accelerates, while John Williams warned inflation could rise toward 4% headline and 3% core in the near term.
What Should Investors Do?
Despite the short-term volatility, major banks remain bullish on gold for 2026. JP Morgan maintains its forecast of $6,300/oz by end of 2026, while Deutsche Bank and UBS predict $6,000+. The structural drivers — central bank buying, US dollar weakness, and investor diversification — remain intact.
For South Asian investors, it is worth noting that gold in Indian Rupees and Pakistani Rupees has held up better than USD gold due to currency depreciation. Even at current USD levels, INR and PKR gold prices remain historically elevated.
Key Levels to Watch
- Support: $4,300/oz (strong buying zone)
- Resistance: $4,600/oz (previous consolidation area)
- Key catalyst: US-Iran peace deal or further escalation
Disclaimer: This article is for informational purposes only and does not constitute financial advice.