Gold slips ahead of Fed decision — but could surge soon as Middle East conflict and rate cuts loom
TIMESOFINDIA.COM Gold prices dip ahead of Fed decision but strong chances of future rate cuts and rising Israel–Iran conflict tensions could push gold higher again. Here's why investors are eyeing gold now and what could drive it in 2025.
Gold prices slipped slightly on Tuesday, June 18, 2025, as traders turned their focus to the Federal Reserve's upcoming policy decision. But despite this minor pullback, experts believe gold could rally again soon as the Israel–Iran conflict continues and the U.S. economy shows signs that rate cuts may not be far off.
Spot gold dipped around 0.2% to $3,383.17 per ounce, while gold futures in the U.S. fell 0.3% to $3,393.10 per ounce. That marked a slight pause in gold's recent upward trend, which has largely been driven by global tensions and fears of economic slowdown.
Spot gold fell 0.2% to $3,383.17 per ounce.
U.S. gold futures dropped 0.3% to $3,393.10 per ounce.
This drop follows a 1% gain earlier in the week due to Middle East tensions.
Profit-taking by traders caused the short-term dip, despite overall bullish sentiment.
The key reason for gold's dip is the Federal Reserve's policy meeting, scheduled for this week. Right now, the central bank is expected to hold interest rates steady at 4.25% to 4.50%, but the bigger question is what comes next. According to the CME FedWatch tool, there's a 99.9% chance that the Fed will not change rates during this meeting. However, many analysts are betting on rate cuts starting later this year, especially as recent U.S. data shows signs of a slowing economy. For instance:
Retail sales came in lower than expected.
came in lower than expected. Housing data and industrial output also showed weakness.
and also showed weakness. Unemployment claims have been ticking higher. When interest rates go down, gold tends to shine. That's because lower rates reduce the opportunity cost of holding non-yielding assets like gold. If the Fed hints at future cuts, it could give gold prices a fresh boost. The Federal Reserve is expected to keep interest rates unchanged at 4.25%–4.50% during this week's policy meeting.
The CME FedWatch Tool shows a 99.9% probability of no rate hike.
Traders are now betting on rate cuts by September 2025 or earlier.
Lower rates reduce the cost of holding gold, which doesn't pay interest.
Slowing U.S. economic indicators include: Retail sales have weakened. Industrial production showed signs of cooling. Housing market momentum has slowed. Initial jobless claims have risen in recent weeks.
Even though gold dipped slightly on Tuesday, it's still holding near strong levels thanks to ongoing geopolitical risks. The Israel–Iran conflict continues to escalate, with missile strikes and drone attacks reported almost daily over the past week. The U.S. has increased its military presence in the region, and the situation remains highly unstable. As a result, many investors continue to view gold as a safe-haven asset, especially when global tensions rise.
Just earlier this week, gold jumped over 1% due to fears that the Middle East conflict could widen. Though some traders booked profits after that rally, the underlying support for gold remains firm as long as geopolitical uncertainty continues. Goldman Sachs expects: $3,700/oz by end of 2025 $4,000/oz by mid-2026
expects: Bullish drivers include:
Record gold purchases by central banks, especially in Asia and the Middle East. Ongoing global economic uncertainty. Expected rate cuts that favor non-yielding assets like gold. Elevated oil prices, with WTI crude trading at $76–$77 per barrel , increasing inflation concerns.
Despite Tuesday's modest dip, several major banks still see gold climbing much higher in the months ahead. According to Goldman Sachs, gold could reach $3,700 by the end of 2025 and even hit $4,000 by mid-2026.
Why are analysts so bullish?
Central banks, especially in Asia and the Middle East, are buying gold at record pace to diversify away from the U.S. dollar.
Continued economic uncertainty and the possibility of a recession are driving demand.
Expected interest rate cuts later in 2025 will make gold even more attractive to long-term investors. In addition, oil prices remain elevated, trading around $76 to $77 per barrel, which adds to inflation concerns and typically supports gold prices. If you're a U.S. investor keeping an eye on gold, now may be a time to stay alert. While short-term fluctuations will happen — especially around big events like Fed meetings — the bigger picture still points to strength in gold. The combination of Federal Reserve policy shifts, Middle East tensions, and ongoing economic uncertainty creates a landscape where gold can play a meaningful role in protecting wealth. Many investors may choose to look at gold ETFs, physical bullion, or even gold mining stocks to gain exposure, depending on their risk appetite and investment strategy. Short-term dips like this are common around Fed announcements.
Many are using this pause as a buying opportunity, especially if rate cuts are on the horizon.
Investment options include: Gold ETFs Physical gold (coins, bars) Gold mining stocks
Gold remains a key hedge against inflation, geopolitical risk, and economic slowdowns.
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