Gold prices recovered from their lowest levels of the session on Monday as renewed geopolitical tensions increased demand for defensive assets, although expectations of higher U.S. interest rates continued to cap gains.
The precious metal remained under pressure from rising Treasury yields and a stronger dollar, even as investors sought safety following the latest escalation between the United States and Iran.
Precious Metals Remain Under Pressure
At 01:05 ET (05:05 GMT), spot gold (XAU/USD) traded 1.54% lower at $4,057.76 an ounce, while Gold Futures fell 1.17% to $4,065.45 an ounce.
Silver (XAG/USD) declined 2.80% to $58.19 an ounce, and platinum (XPT/USD) slipped 1.61% to $1,604.60 an ounce.
Middle East Conflict Keeps Safe-Haven Demand Elevated
Investor demand for defensive assets strengthened after the United States launched fresh strikes against Iranian targets over the weekend in response to an attack on a Cyprus-flagged cargo ship in the Strait of Hormuz.
Iran subsequently announced that the strategic shipping corridor would remain closed “until further notice,” although U.S. officials rejected the claim, keeping uncertainty over regional stability elevated.
Oil Rally Strengthens Inflation Concerns
Crude prices remained more than 3% higher after giving back part of an earlier surge of nearly 5%.
The possibility of prolonged disruptions to energy supplies has renewed concerns that inflation may remain stubbornly high, potentially forcing the Federal Reserve to maintain restrictive monetary policy for longer.
Higher interest rates typically reduce the attractiveness of gold because the metal does not generate income.
Minutes from the Fed’s June meeting showed that several policymakers continued to see justification for further tightening, while inflation remained a greater concern than labour market conditions.
Inflation Data and Fed Signals Could Drive the Next Move
Markets are now focused on Tuesday’s U.S. inflation report and Federal Reserve Chair Kevin Warsh’s congressional testimony.
IG analyst Tony Sycamore said gold remains highly responsive to both inflation data and geopolitical developments.
He noted that support around the $4,000 level remains intact, while a sustained move above $4,200-$4,220 could improve the technical outlook toward the 200-day moving average near $4,491.
However, stronger-than-expected CPI data could strengthen the U.S. dollar and reinforce expectations of another interest-rate increase before year-end.
The U.S. Dollar Index rose 0.3% on Monday, adding further headwinds for bullion.
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