Gold drops to over one-year low as fading Middle East peace hopes fan inflation fears

Gold prices slid about 3% on Thursday, extending losses to a third straight session and reaching a more-than-one-year low. Reuters reported that oil prices climbed as hopes for peace in the Middle East faded. That fed fears of higher inflation and of elevated interest rates.

Spot gold was down 2.7% at $3,880.93 per ounce by 1:53 p.m. ET (1855 GMT). Earlier in the session it touched its lowest level since October 2025. US gold futures for December delivery settled 2.9% lower at $3,885.30 per ounce.

Gold pays no interest, so it tends to come under pressure when interest rates are expected to stay high or rise. Reuters said oil rose, which added to inflation concerns and to expectations that the US Federal Reserve could keep rates higher for longer. David Meger, director of metals trading at High Ridge Futures, said higher energy prices continue to warrant a hawkish Fed. He described that environment of higher interest rates as a headwind for gold.

Other factors also weighed on the metal. Jim Wyckoff, a market analyst at American Gold Exchange, pointed to a hot US inflation reading on Tuesday and to hawkish remarks from Fed officials this week. He also cited a US dollar rally to a near 19-month high. A stronger dollar generally makes dollar-priced gold more expensive for buyers who hold other currencies, which can dampen demand. In his view these developments were working to press the gold market lower.

Interest-rate expectations are central to the move. According to the Reuters report, traders saw an 87% chance of a 25-basis-point Fed rate hike in December. The probability of a larger 50-basis-point move had also increased. A rate-hike outlook is a notable change for gold, which is often supported when markets expect rate cuts.

The broader backdrop for precious metals has been the shift in rate expectations. MiningMX, which also summarised the Reuters report, noted that Erik Norland, chief economist at derivatives exchange CME Group, was quoted in the Financial Times last month. He said the largest contributing factor to this year's decline in precious metals prices was the shift in expectations from rate cuts to rate increases. He also called it astonishing that prices remained significantly higher than at the beginning of 2025.

The report noted some support from official-sector demand. Citing provisional World Gold Council data, the Financial Times said central bank gold buying in September rose to its highest monthly level since November 2024. That buying has not stopped the recent price decline.

For currency and gold traders, the session shows how closely the metal's price is tied to the dollar, bond yields and expectations for Fed policy. In this episode, geopolitical tension did not produce the usual safe-haven demand for gold. Instead, its effect on oil and inflation expectations pushed rate-hike bets higher and weighed on the metal.

Market attention now turns to further US inflation data and to comments from Fed officials. These could shift expectations for the Fed's December meeting. Market pricing reflects probabilities at a point in time and can change quickly with new data, so it does not guarantee any future move in gold or the dollar. This article is for information only and is not financial advice.

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This is a news summary for general information only — not financial advice, and nothing here is a recommendation to buy or sell any currency or metal. Exchange rates and gold prices can move sharply around data releases and central-bank decisions, and trading them carries a real risk of loss, which leverage magnifies. Always verify against the original source and do your own research before making a financial decision.