Gold Prices Plummet Amid US-Iran Tensions and Rate Hike Fears

Gold prices hit their lowest point in over three weeks on Wednesday as tensions between the US and Iran escalated, fueling concerns about inflation and rate hikes. The conflict pushed oil prices higher for a third straight session, which in turn drove up U.S. Treasury yields.

A rebound in oil prices added to inflation worries, making it more likely that monetary policy expectations will tighten and interest rates will rise, weighing on gold's appeal. Gold is often seen as a hedge against inflation, but higher interest rates make its lack of yield less attractive.

According to the CME FedWatch Tool, investors are currently pricing in a 68% chance of a rate hike at the Federal Reserve's policy meeting this month. This expectation was echoed by Fed Governor Michael Barr, who said that if inflation doesn't cool down quickly, it will be time for the central bank to raise rates.

Investors are now awaiting the ADP employment report later in the day and the more crucial nonfarm payrolls data on Friday. Softer figures could ease pressure on gold, while stronger data or more hawkish Fed comments may extend its decline.