Gold prices tumbled to a two-month low this Thursday, pressured by a strengthening dollar and rising crude oil costs following recent military escalations between the U.S. and Iran. Spot gold dropped 1.7% to $4,380.62 per ounce, marking its weakest performance since late March, while U.S. gold futures saw a similar decline. As the dollar climbs to a one-week high, bullion has become significantly more expensive for international investors, leading analysts like Matt Simpson of StoneX to predict continued downward pressure on the metal as long as geopolitical uncertainty keeps the greenback in demand.

The volatility has been further fueled by a spike in oil prices, which jumped over 3% after Iranian retaliation for U.S. strikes on military targets. This surge in energy costs is intensifying fears of runaway inflation, creating a complex outlook for the Federal Reserve. Although gold is traditionally viewed as an inflation hedge, the prospect of the Fed maintaining or increasing interest rates to combat rising costs makes the non-yielding asset less attractive. Investors are now closely monitoring upcoming U.S. personal consumption expenditure data to gauge the central bank’s next steps, while broader precious metal markets, including silver and platinum, have also retreated to near one-month lows.