Gold lacklustre as higher-for-longer rate outlook weighs on sentiment

U.S. President Donald Trump warned that he could annihilate Iran if there is no deal to end the war, but also suggested an agreement could come soon amid a diplomatic push at the United Nations.

Analysts at BMI maintained their 2026 gold price forecast at an average of $4,400 per ounce, noting that elevated geopolitical risks and continued central bank purchases are expected to ensure a strong floor under gold around the $3,800 level.

Among other metals, spot silver XAG= fell 0.4% to $66.78 per ounce, platinum XPT= lost 0.8% to $1,818.21 and palladium XPD= declined 0.4% at $1,302.61.

"Short-term volatility in gold very much depends on how oil trades and the developments that happen in the Middle East. However, long-term structural drivers for gold are still really strong," said Kyle Rodda, senior financial market analyst at Capital.com. O/R

While bullion is often seen as a safeguard against inflation, its appeal tends to wane when elevated rates boost returns on interest-bearing investments.

Boston Federal Reserve President Susan Collins wrote in a Linkedin post that she supported the U.S. central bank's decision last week to raise interest rates in the face of risks that future inflation will be above the 2% target. Collins, who is not a voting member of the rate-setting Federal Open Market Committee this year, did not say if she wants rates to go up again.

The Fed last week lifted its benchmark rate by 25 basis points to 3.75%-4.00% and signalled another increase could come before year-end. The Bank of Japan and the European Central Bank have also raised rates recently.

Gold prices eased on Wednesday as investors weighed the prospect of major central banks keeping interest rates elevated for longer in their efforts to curb persistent inflation.