As the Federal Reserve’s aggressive outlook weighed on its unyielding appeal, gold fell to about $4,766 per ounce on Thursday, falling for the seventh session to reach an almost six-week low. Gold has continued to trend lower since the outbreak of the US-Israel war involving Iran. The price of gold per ounce was $5,200 on February 28, and is currently trading at $4,766, down nearly 8% since the conflict began.
One major factor weighing on gold is the US Fed’s policy stance. US Federal Reserve Chair Powell kept interest rates unchanged at the March FOMC meeting. The central bank has not only refrained from cutting rates at its March FOMC meeting but also warned about resurgent inflation ahead. In such an environment, gold faces resistance under a higher-for-longer interest rate scenario. Fed policymakers noted that while economic activity has been rising at a solid pace, job growth has been limited, and inflation remains slightly elevated.
Policymakers still forecast one cut in the federal funds rate this year and another in 2027, broadly consistent with the December projections, although the timing remains uncertain. The updated ‘dot plot’ shows the central bank expects rates falling to 3.4% by year-end, suggesting at least one rate cut this year rather than two as projected earlier.
Data shows US inflation remained elevated even before the Middle East conflict. Recently released US PPI data showed prices rising more than expected again. US producer prices increased by 0.7% in February 2026, higher than January’s 0.5% rise and above forecasts of 0.3%. This marked the largest increase in seven months, driven by a 1.1% surge in goods prices — the biggest rise since August 2023. Meanwhile, CPI data also delivered mixed signals.
The latest inflation readings reinforce signs that inflation remains firm beyond energy-related factors. In the press conference on March 18, Powell acknowledged the Iran war’s impact on inflation. “Near-term inflation expectations have risen in recent weeks, largely reflecting higher oil prices caused by Middle East supply disruptions,” Powell said.
The full inflation impact arising from the Iran war and the energy crisis will become clearer once the March US CPI and PPI data are released in April.
US Dollar index
The other major factor posing headwinds for gold is the strength of the US Dollar Index, which measures the performance of the dollar against a basket of currencies.
The longer the war continues, the more likely it is that oil prices will remain elevated, supporting the US dollar. The dollar index rebounded above 100 on Thursday, as concerns over persistent inflationary pressures intensified. Oil prices have also climbed after Iran reported that some of its energy facilities had come under attack, adding to inflation worries.
Growth Outlook
The third factor posing a headwind for gold is the growth outlook for the US economy as assessed by Federal Reserve officials. Powell said during the press conference, “The U.S. economy has been expanding at a solid pace.” The central bank expects the U.S. economy to grow by 2.4% this year, a slight increase from the December estimate of 2.3%.
But, not all are willing to accept the uptick in US economic growth. Jeffrey Roach, Chief Economist at LPL Financial, said to Kitco that the Federal Reserve appears to be in a holding pattern as it continues to navigate uncertain economic waters.
“The upward revision to 2026 growth is misleading if not presented in context. Weaker growth in Q4 2025 suggests the economy is on a more fragile footing than originally estimated. The likely productivity boost from AI could help offset slower population growth, shrinking labor force, and persistent services inflation,” Roach said.
The U.S. Commerce Department revised fourth-quarter 2025 GDP growth down to 0.7 percent, significantly lower than the initial estimate of 1.4 percent and a notable decline from growth rates of 4.4 percent in the third quarter and 3.8 percent in the second quarter of 2025.
Overall, the Middle East energy crisis and its impact on inflation and the US dollar remain key drivers for gold prices for the months ahead. In the absence of any fresh trigger, geopolitical uncertainty, as well as expectations for a weaker dollar and lower interest rates, could eventually support gold prices.