Gold drops below $4,000 despite persistent Middle East tension

Spot gold surrendered early gains to close down $48.60, or 1.21%, at $3,983.20 an ounce on Wednesday, according to Kitco News. The decline followed a rally in the US dollar and rising expectations of further Federal Reserve interest rate hikes.

Spot silver traded higher over the same session, gaining $0.149, or 0.29%, to reach $51.560 an ounce. Meanwhile, the US dollar index rose about 0.7% toward 102.90, approaching its highest point since April 2025.

Market expectations for Fed rate increases intensified after Tuesday's US consumer price index showed headline inflation rose 0.4% in October. Futures markets priced an 87.1% probability of a 25-basis-point rate hike at the December 8-9 Fed meeting.

Crude oil prices also advanced Wednesday amid ongoing geopolitical tensions in the Strait of Hormuz. Brent crude futures gained $1.27, or 1.39%, to settle at $92.76 a barrel, while Nymex WTI crude rose $0.49 to $86.53.

Investors now look to Thursday's weekly jobless claims and Friday's October producer price index for further signals on monetary policy. Kitco reported that softer producer inflation could relieve pressure on gold, while stronger data would support additional rate hikes.

What do these terms mean?

Spot gold: The current market price at which gold can be bought or sold for immediate settlement and delivery.

Basis point: A unit of measure equal to one-hundredth of one percentage point, commonly used in financial markets to express changes in interest rates.

Consumer price index: An economic indicator that measures the average change over time in the prices paid by consumers for a basket of goods and services.

Futures market: An auction market in which participants buy and sell commodity and futures contracts for delivery on a specified future date.