Gold Prices Decline Amid Mideast Tensions

Gold prices decreased on Tuesday, May 26, as renewed U.S. military actions in Iran elevated oil prices, intensifying concerns about inflation and prolonged higher interest rates. Spot gold was down 0.6% at $4,544.33 per ounce as of 0049 GMT, while U.S. gold futures for June delivery saw a marginal gain of 0.5% to $4,545.60.

The U.S. conducted strikes in southern Iran, targeting boats and missile launch sites, which it described as defensive measures. These actions occurred despite ongoing talks in Doha between Iran's top negotiator and foreign minister with Qatar's prime minister regarding a potential deal with the U.S. to end a three-month conflict. Brent crude futures subsequently rose nearly 2% in early Asian trade.

Elevated crude oil prices contribute to inflation, which can lead to central banks maintaining higher interest rates. While gold is traditionally viewed as an inflation hedge, higher interest rates typically diminish the appeal of non-yielding assets like gold. Markets are currently pricing in a 54% chance of a U.S. Federal Reserve rate hike by December, according to CME Group's FedWatch tool.