Why gold prices are climbing amid Middle East tensions and Fed rate cut bets

Gold prices advanced on Thursday, June 12, as investors sought refuge amid rising tensions in the Middle East and a declining US dollar. Softer inflation data in the US also strengthened expectations of a rate cut by the Federal Reserve.

Spot gold rose 0.7% to $3,375.06 an ounce in early trade, while US gold futures gained 1.5% to $3,395 an ounce.

In India, the price of 24-karat gold

touched ₹99,280 per 10 grams. The 22-karat and 18-karat variants stood at ₹91,000 per 10 grams and ₹74,460 per 10 grams respectively, according to Goodreturns.

Dollar weakness, inflation data drive momentum

The dollar index slipped to a two-month low, making gold more attractive for international buyers. US CPI data showed a 0.1% rise in May, below the 0.2% estimate. Year-on-year inflation stood at 2.5%, reinforcing expectations of monetary easing.

“Markets now price in a 68% probability of a Fed rate cut by September,” said Manav Modi, Senior Analyst at Motilal Oswal Financial Services. “This keeps sentiment tilted in favour of gold.”

Geopolitical tensions add to safe-haven demand

US President Donald Trump announced the relocation of personnel from the Middle East amid escalating friction with Iran. Meanwhile, signals of potential military action by Israel further unsettled markets.

Aksha Kamboj, Vice President of India Bullion and Jewellers Association, noted, “Concerns over US-Iran ties and unresolved issues in the US-China trade agreement have lifted demand. Central banks continue to accumulate gold as a key reserve asset, offering additional price support.”

Outlook

With the US Producer Price Index data due later today and global risks in focus, analysts expect gold to remain firm. Technical indicators point to further upside if the metal holds above key resistance levels.

-With Reuters inputs