Gold prices dropped to their lowest level in nearly two months on Thursday, May 28, as escalating tensions between the United States and Iran strengthened the US dollar and lifted crude oil prices, creating fresh uncertainty around inflation and future interest rate decisions. 

Spot gold declined 1.1% to $4,406.81 per ounce during early trading hours, while US gold futures for June delivery slipped 0.9% to $4,404.90.

The decline came after the US military reportedly launched fresh strikes targeting an Iranian military site that officials believed threatened both American forces and commercial shipping routes near the Strait of Hormuz. 

The development intensified geopolitical concerns and pushed investors toward the dollar, which climbed close to a one-week high. A stronger dollar generally makes gold more expensive for buyers using other currencies, reducing demand for the precious metal.

Analysts noted that repeated setbacks in diplomatic discussions between Washington and Tehran have increased market caution. Rising oil prices further complicated the outlook, with crude gaining nearly 2% in Asian trading. Higher energy prices often fuel inflationary pressure, which can force central banks to maintain elevated interest rates for longer periods. Since gold does not offer any yield, higher rates usually reduce its attractiveness among investors.

Recent commentary from Federal Reserve Governor Lisa Cook also weighed on market sentiment. She indicated that the US central bank may keep rates unchanged for now but remains open to further tightening if inflation accelerates due to tariffs, geopolitical tensions, or strong investment activity linked to artificial intelligence.

Over the past six months, the Federal Reserve has consistently highlighted inflation control as its primary focus through policy statements and regulatory updates, keeping financial markets highly sensitive to upcoming economic data. 

Investors are now closely watching the release of the US Personal Consumption Expenditures (PCE) data for additional signals on the Fed’s next policy move.

Among other precious metals, silver declined 1.6%, platinum eased 0.8%, and palladium fell 1%.

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