Gold rises on Middle East tensions, Fed rate cut expectations

June 12, 2025 (MLN): Gold prices rose on Thursday, bolstered by rising tensions in the Middle East and a weaker dollar, while softer-than-expected U.S. inflation data boosted expectations of Federal Reserve rate cuts.

Spot gold was up 1.07% at $3,368.88 an ounce, as of [12:20 pm]. U.S. gold futures gained 1.5% to $3,395.

Rising geopolitical risks aided safe-haven assets, with President Donald Trump announcing on Wednesday that U.S. personnel were being moved out of the Middle East due to heightened security risks amid rising tensions with Iran.

The U.S. dollar index fell to a near two-month low, making greenback-priced bullion more attractive to overseas buyers. 

The weakness in the dollar index serves as a strong catalyst, said Kelvin Wong, a senior market analyst, Asia Pacific at OANDA, adding that a “bullish breakout” of the $3,346 resistance triggered technical buying.

Meanwhile, U.S. consumer prices increased less than expected in May, driven by cheaper gasoline, though inflation could accelerate due to import tariffs.

The data prompted renewed calls from Trump for significant rate cuts.

“We could potentially see the Fed moving more quickly than anticipated, given the CPI data, which is not particularly alarming at this juncture,” Wong said.

Traders now expect 50 basis points of rate cut by year-end.

Meanwhile, Trump said on Wednesday that Washington and Beijing had agreed on a framework to restore a fragile truce in the U.S.-China trade war, potentially avoiding higher tariffs.

Trump added he could extend a July 8 deadline for trade talks with other nations before higher U.S. tariffs take effect, but did not foresee such a need.

Elsewhere, spot silver was up 0.4% at $36.38 per ounce, platinum rose 1.3% to $1,272.50, still hovering near a more than 4-year high, while palladium was down 1% at $1,068.92.

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