Gold prices retreated on Thursday as a stronger U.S. dollar and signals of tighter monetary policy from the Federal Reserve reduced demand for the safe-haven metal.
Spot gold fell 0.3 percent to US$4,245.99 per ounce after dropping 1.7 percent in the previous session, while U.S. gold futures declined 2.6 percent to US$4,265.50 per ounce.
The decline came as the U.S. dollar strengthened, with the dollar index rising 0.7 percent. A stronger greenback makes gold and other dollar-denominated commodities more expensive for holders of other currencies, often weighing on demand.
Investor sentiment was also influenced by the U.S. Federal Reserve’s latest policy decision. The central bank left interest rates unchanged on Wednesday but indicated that borrowing costs could rise later this year as inflation remains above target.
Federal Reserve Chair Kevin Warsh also announced a review of the central bank’s operations through a series of task forces, a move analysts said could increase market sensitivity to future economic data and policy signals.
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“The hawkish Fed leaves spot gold with a greater bias of dipping back below US$4,000 rather than reclaiming the $5,000 level in the second half of 2026,” said Han Tan, chief market analyst at Bybit.
According to the CME FedWatch Tool, financial markets are now pricing in an 88 percent probability of a U.S. interest rate increase in December.
Higher interest rates tend to reduce the appeal of gold because the precious metal does not generate interest or dividends, making yield-bearing assets more attractive.
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Despite the recent decline, analysts noted that physical demand and central bank purchases continue to provide support for the market.
ANZ Research said investment demand remained relatively weak due to exchange-traded fund outflows and lighter speculative positioning, but robust buying from China and central banks was helping to underpin prices.
Investors also continued to monitor developments in the Middle East after the United States and Iran released details of an agreement aimed at ending their recent conflict.
However, uncertainty persisted after U.S. President Donald Trump warned that military action could resume if Iran failed to comply with the terms of the agreement.
Among other precious metals, silver fell 1 percent to US$67.29 per ounce, platinum declined 2.1 percent to US$1,701.02, while palladium dropped 2.6 percent to US$1,277.79.
Market participants are expected to focus on upcoming U.S. economic data and Federal Reserve communications for further clues on the outlook for interest rates and precious metals prices.
