Spot gold dropped below the $4,000 per ounce threshold, declining 1.5% as a surge in oil prices on fears of a Strait of Hormuz closure revived expectations of elevated interest rates. The selloff extended across precious metals, with silver, platinum and palladium all falling as the dollar and Treasury yields climbed.
Spot gold fell below $4,000 an ounce, dropping 1.5%, as a surge in oil prices on Strait of Hormuz closure fears revived expectations of higher interest rates.
"Any breakout of violence in the Gulf is accompanied by pressure on gold," Nicholas Frappell, global head of institutional markets at ABC Refinery, said.
Oil jumped about 4% after U.S. and Iranian forces exchanged heavy missile and drone assaults, with Tehran again closing the vital waterway. WTI crude has risen 13.8% in July and Brent 14.75%, according to market data. The dollar and U.S. Treasury yields climbed, while traders priced in a 72% chance of a Federal Reserve rate hike in September, up from 63% last week, per the CME FedWatch Tool.
The question for gold is whether a prolonged closure of the Strait of Hormuz leads to demand destruction and lower economic activity — a scenario that could ultimately prove supportive for the precious metal, Frappell said. Kevin Warsh's first semiannual testimony as Fed chair and key U.S. data including June CPI, PPI and retail sales are due this week.
The selloff extended across the precious metals complex. Silver declined 2.9% to $58.14 an ounce, platinum shed 1.8% to $1,598.48, and palladium fell 2.3% to $1,247.27.
Gold had already been under pressure after breaking below the $4,350 level last week following stronger-than-expected U.S. jobs data, which reinforced the case for higher-for-longer rates. The $4,000 level had been viewed as a key support zone, with the $4,200 to $4,250 area serving as minor support on the way down.
The rebound in oil prices has added to inflation concerns, as higher energy costs feed through to consumer prices. Citigroup warned that Iran could delay negotiations until the U.S. midterm elections, potentially keeping oil prices elevated for an extended period.
Remarks from Fed policymakers including Vice Chair Michelle Bowman and Governor Christopher Waller later Monday are also in focus for clues on how the central bank views the inflation outlook.
This article is for informational purposes only and does not constitute investment advice.
