Gold prices fall as US-Iran tensions fuel inflation concerns and Fed rate hike expectations

JAKARTA, KOMPAS.com - World gold prices fell over 1% by the close of trading on Tuesday 26 May 2026 US time or Wednesday 27 May 2026 morning WIB, pressured by rising inflation concerns and expectations of higher interest rates.

The decline followed the United States (US) launching a new military strike on Iran, which triggered a surge in oil prices and heightened inflation worries.

According to Reuters, spot gold dropped 1.3% to $4,511.23 per ounce.

US bond markets now anticipate the next Federal Reserve (the Fed) policy move to be a rate hike rather than a cut.

“That’s negative sentiment for the gold market at present,” said Jim Wyckoff, a market analyst at American Gold Exchange.

Geopolitical tensions escalated again after the US conducted a new military strike on Iran.

The situation also pushed Brent crude oil prices up over 4% amid uncertainty over when shipments through the Strait of Hormuz might normalise.

Rising oil prices are expected to fuel inflation as producers may pass on higher energy costs to consumers.

Meanwhile, Kevin Warsh was officially appointed as Federal Reserve Chair on Friday 22 May 2026, amid growing expectations that the US central bank will tighten monetary policy.

Although gold is known as an inflation hedge, the precious metal tends to be pressured when interest rates are high because it does not generate returns.

Wyckoff added that technical pressures are also contributing to gold’s short-term weakness.

“Short-term technical indicators remain bearish, triggering technical selling,” he said.