A fresh round of fighting in the Gulf is pushing oil higher and gold lower, as traders brace for more Fed rate hikes.
Gold slipped on Monday after new U.S.-Iran strikes sent oil prices climbing, adding fuel to bets that the Federal Reserve isn’t done raising rates anytime soon.
Key Details
Spot gold dropped 0.6% to $4,062.89 an ounce by 04:23 GMT. U.S. futures for August delivery fell 0.5% to $4,077.50. That puts gold on track for its fourth straight monthly loss, down 10.4% over that stretch.
The selloff follows a weekend of escalation: Iran fired missiles and drones at U.S. military sites in Bahrain and Kuwait, hours after President Trump warned he’d target Iranian leadership if they broke the ceasefire. By Sunday, though, Axios reported both sides had agreed to pull back and restart talks over the Strait of Hormuz.
Market Reaction
Oil jumped on the news, dragging gold down with it. Silver lost 1.2% to $58.47, while platinum and palladium both edged higher, up 0.2% and 0.4% respectively.
Why It Matters
Pricier oil tends to stoke inflation, and inflation usually means higher rates. That’s bad news for gold, which pays no yield and gets less attractive the more rates rise. Markets are now pricing in three Fed hikes this year, with an 80% chance of one in December, according to CME FedWatch.
What’s Next
Traders are watching this week’s ADP and nonfarm payrolls data for clues on the Fed’s next move. One analyst says gold could still reclaim $5,000 this year, but only if oil cools, the dollar softens, and the Gulf truce actually holds.
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Source: Reuters
