Gold Slides as Fed's Waller Signals Rate Hike Still on Table Amid Iran Tensions

Gold prices declined as Federal Reserve Governor Christopher Waller warned that the central bank's next move could be a rate hike rather than a cut, citing concerns that energy shocks from the Iran conflict could reignite inflation. Waller's hawkish stance prompted traders to increase bets on Fed monetary tightening, pressuring the precious metal which typically moves inversely to interest rate expectations.

The Fed official acknowledged that oil price shocks stemming from Middle East tensions could prove temporary, but emphasized the central bank must remain vigilant. "I can no longer rule out rate hikes further down the road if inflation does not abate soon," Waller stated, marking a notable shift in tone from the rate-cut expectations that had dominated market sentiment in recent months. The comments suggest the Fed is keeping all policy tools available as it navigates geopolitical risks that could complicate its inflation fight.

For gold investors, Waller's remarks represent a headwind for the traditional safe-haven asset. Higher interest rates increase the opportunity cost of holding non-yielding bullion while strengthening the dollar, both factors that typically weigh on gold prices. The dual pressure of hawkish Fed policy and potential resolution of Middle East tensions could limit gold's upside despite ongoing geopolitical uncertainty. Traders should monitor upcoming inflation data and crude oil price movements as key indicators of whether the Fed will follow through on Waller's hawkish signal or maintain its current pause.