Gold dives to $4,700, fresh low since February amid Fed's hawkish outlook
LONDON (March 19) Gold (XAU/USD) dives to a fresh low since February 6 during the first half of the European session on Thursday, though it finds some support near the $4,700 round figure. The US Dollar (USD) preserves the previous day's strong gains fueled by the US Federal Reserve's (Fed) hawkish outlook, which, in turn, is seen as a key factor undermining the non-yielding yellow metal. However, heightened geopolitical uncertainties could offer some support to the safe-haven bullion and help limit further losses.
Data published by the US Labor Department on Wednesday showed that the headline Producer Price Index (PPI) rose 0.7% in February, following a 0.5% increase in the previous month. Adding to this, the yearly rate jumped to 3.4%, marking the largest 12-month advance since February 2025. Moreover, the US central bank raised the year-end inflation outlook (PCE), citing risks from higher energy prices due to the Iran war. The Fed also upgraded its 2026 growth projection and projected only one rate reduction this year, and one in 2027. This, in turn, favors the USD bulls and should keep a lid on the attempted recovery in the Gold price.
Meanwhile, energy infrastructure in Persian Gulf countries came under attack today following Israeli strikes on Iran’s South Pars natural gas field – the world’s largest. In response, US President Donald Trump issued a stark warning of potential large-scale retaliation tied to energy infrastructure. Adding to this, the Trump administration is reportedly exploring options to expand its military campaign against Iran and is considering deploying thousands of US troops to reinforce its operation in West Asia. This marks a significant escalation in the conflict and continues to weigh on investors' sentiment, which could support the traditional safe-haven Gold.
Traders might also opt to wait for more policy updates from the Swiss National Bank (SNB), the Bank of England (BoE), and the European Central Bank (ECB), which should infuse volatility in the financial markets. Apart from this, the US economic data – the usual Weekly Initial Jobless Claims and the Philly Fed Manufacturing Index – might provide some impetus to the Gold price. Nevertheless, the fundamental backdrop warrants some caution before confirming that the XAU/USD pair has formed a near-term bottom and is positioning for any meaningful recovery.
FXStreet
