Gold Prices Rebound Over 1% on Safe-Haven Demand Amid Middle East Tensions and Fed Watch

International gold prices rebounded by over 1% on Thursday (10th), recovering from a one-week low the previous session as bargain-hunting investors stepped in. Heightened concerns over Middle East geopolitical developments and anticipation of the U.S. Federal Reserve's (Fed) future interest rate policy further supported the rally.

At 2:05 p.m. New York time, spot gold rose 1.3% to $4,130.58 per ounce, having dipped to its lowest level since July 1 the day before. August-delivery New York gold futures closed up 1.4% at $4,140.80 per ounce.

Bob Haberkorn, Senior Market Strategist at StoneX, said the sharp drop in gold prices the prior day attracted some investor buying interest. In the short term, he noted, the Fed's monetary policy remains the most critical factor influencing gold's trajectory.

He added that if the Fed adopts a more dovish stance on interest rates, gold and silver prices could climb further. Conversely, if the Fed signals a need for additional rate hikes, both precious metals could face renewed downward pressure.

On the geopolitical front, after U.S. airstrikes targeted southern coastal and eastern regions of Iran, Iran's armed forces launched attacks on U.S. military installations in nearby Persian Gulf countries, putting a three-week ceasefire agreement back under strain.

Analysts pointed out that if the conflict drives up energy prices, it could exacerbate global inflationary pressures, increasing expectations for central banks to maintain higher interest rates. While gold is traditionally viewed as an inflation hedge, its appeal tends to wane when interest rates rise, as investors may shift capital toward higher-yielding interest-bearing assets.

According to the CME Group's FedWatch tool, markets currently assign a roughly 64% probability of a Fed rate hike in September.

The Fed's recently released June meeting minutes revealed that policymakers' concerns about inflation remain elevated, with some officials suggesting there could be justification for further rate hikes before the central bank opts to hold rates steady.

Investors will now focus on next week's U.S. inflation data and Federal Reserve Chair Kevin Warsh's congressional testimony for further clues on the future path of monetary policy.

Meanwhile, HSBC has downgraded its medium- to long-term gold price forecasts in its latest report, lowering its 2026 average gold price estimate from $4,864 per ounce to $4,560, and its 2027 forecast from $5,000 to $4,925 per ounce.

Other precious metals also rose in tandem: spot silver gained 3.4% to $60.25 per ounce; platinum climbed 2.3% to $1,615.25; and palladium advanced 3.3% to $1,253.25 per ounce.