Gold prices were little changed on Monday as markets assessed the impact of escalating tensions between the United States and Iran while weighing expectations that higher oil prices could keep U.S. interest rates elevated for an extended period.
At 22:17 ET (02:17 GMT), XAU/USD edged 0.1% higher to $4,020.63 an ounce, while Gold Futures advanced 0.8% to $4,030.2. Silver outperformed, with XAG/USD rising 1.8% to $56.97 an ounce, while platinum gained 0.2% to $1,598.45.
Rising oil prices revive inflation worries
Gold remained under pressure after losing more than 2% last week as investors questioned whether the renewed military conflict in the Middle East could slow the recent progress in reducing inflation.
Brent crude moved back above $90 a barrel after military activity between the United States and Iran intensified during the weekend. The latest escalation included an attack on a major oil installation in Kuwait and strikes involving vessels transiting the Strait of Hormuz, increasing concerns over the security of global energy supplies.
Tehran said the ceasefire between the United States and Iran had effectively collapsed, raising the possibility of prolonged disruption along one of the world’s busiest oil shipping routes.
As the conflict enters its fifth month, higher energy and commodity prices continue to influence market sentiment, while uncertainty surrounding U.S. President Donald Trump’s strategy toward Iran remains a key focus for investors.
Interest rate expectations continue to drive gold
Although recent U.S. inflation and employment data have pointed to moderating economic conditions, markets remain focused on whether rising energy prices could delay the Federal Reserve’s progress in bringing inflation back to target.
Higher oil prices risk keeping inflation elevated, increasing the likelihood that the Federal Reserve maintains restrictive monetary policy. Higher interest rates generally strengthen the U.S. dollar and Treasury yields, reducing the attractiveness of non-yielding assets such as gold.
ANZ analysts said last week’s escalation in the Middle East briefly pushed market expectations for a Federal Reserve rate increase at the July 29 meeting to around 40% before easing to roughly 10%, highlighting the close relationship between gold prices and interest rate expectations.
The bank added that the bar for another Fed rate increase remains high and continues to expect policymakers to leave rates unchanged this year. It believes the central bank will likely look through higher energy prices unless they trigger broader second- and third-round inflationary effects. ANZ also expects gold to find support between $3,800 and $4,000 an ounce as expectations for additional policy tightening continue to ease.
Gold has remained close to the psychologically important $4,000 level in recent weeks after falling 14% during the second quarter, its weakest quarterly performance since 2013, illustrating how monetary policy expectations continue to outweigh traditional safe-haven buying.
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