Gold steadied toward $4,600 per ounce on Wednesday as Federal Reserve (Fed) Chair Jerome Powell signalled that the central bank sees no need to raise interest rates in response to the oil shock from the Iran war, easing one of the heaviest pressures that pushed bullion to its worst monthly performance since October 2008.
Gold spot prices closed Tuesday at approximately $4,562, recovering modestly from the lows of a brutal March in which the metal fell roughly 13 to 14.6 percent, its steepest single-month decline in nearly two decades. The drop was driven not by waning geopolitical risk but by the opposite dynamic: surging oil prices from the Iran conflict pushed inflation expectations sharply higher, leading markets to price in tighter monetary policy and lifting bond yields that erode the appeal of non-yielding assets like gold.
Powell’s remarks at Harvard University on Monday changed that calculus. Speaking during a guest lecture in an introductory macroeconomics class, the Fed chair said he sees inflation expectations as broadly anchored despite rising energy costs, and argued that tightening policy now would be counterproductive. “Monetary policy works with long and variable lags, famously, and so by the time the effects of a tightening in monetary policy takes effect, the oil price shock is probably long gone,” he said.
Bond markets responded sharply. Going into Monday, traders had priced in a better than 50 percent chance of a quarter-point rate increase at the Fed’s next meeting. After Powell’s appearance, odds of a hike by December fell to 2.2 percent.
The reversal in rate hike expectations offered gold its first meaningful relief in weeks. Higher real yields had been the dominant headwind for bullion throughout March, as the Iran conflict created a paradox for precious metals markets: geopolitical risk would normally drive investors into gold as a safe haven, but the inflationary fallout of surging crude prices was simultaneously strengthening the dollar and pushing up Treasury yields, removing gold’s relative attractiveness.
The conflict, which entered its fifth week this week, has effectively closed the Strait of Hormuz to commercial shipping, removing a waterway that previously carried roughly a quarter of the world’s seaborne oil. Iran struck a Kuwaiti oil tanker near Dubai on Tuesday, and the Houthi movement in Yemen continued to target Red Sea shipping, maintaining dual pressure on global energy corridors.
Despite Tuesday’s modest recovery, gold closed March down more than 13 percent, its steepest monthly decline since October 2008’s 16.8 percent crash. The Federal Open Market Committee (FOMC) held its benchmark rate unchanged at 3.5 to 3.75 percent at its March 18 meeting, noting that oil-driven inflation had complicated its assessment of competing risks to employment and price stability. The Fed’s dot plot continues to project one rate cut in 2026 and another in 2027.
Major investment banks continue to hold bullish year-end targets. JPMorgan forecasts gold at $6,300 per ounce by December, Wells Fargo projects $6,100 to $6,300, and Goldman Sachs targets $5,400, all maintaining that March’s correction represents a temporary dislocation rather than a structural reversal of the bull market. Whether those targets remain achievable depends on how long the energy shock persists and whether the Strait of Hormuz reopens to commercial traffic in the weeks ahead.
