Gold prices remained above the $4,000 mark on Monday as escalating hostilities involving the United States and Iran continued to fuel demand for safe-haven assets. However, a surge in oil prices tempered the metal’s advance by reinforcing expectations that the US Federal Reserve could keep interest rates higher for longer—or even tighten policy further.
August gold futures opened at $4,005.60 per ounce, down 0.3% from Friday’s close, before recovering to trade near $4,019. Spot gold also hovered around $4,014 during the session, reflecting cautious investor sentiment.
The precious metal is facing conflicting market forces. While geopolitical uncertainty traditionally strengthens gold’s appeal as a safe-haven investment, rising energy prices are increasing inflation concerns, lifting Treasury yields and supporting the US dollar—both of which tend to weigh on non-yielding assets such as gold.
Oil prices briefly climbed above $90 per barrel after the US launched a ninth consecutive night of strikes targeting Iranian positions. At the same time, shipping activity through the Strait of Hormuz remained severely disrupted, with only four vessels reported to have crossed the strategic waterway on Sunday, heightening concerns over global energy supplies.
The conflict intensified further after two US service members were killed in Iranian attacks in Jordan and another died following the explosion of an Iranian drone in Iraq. The incidents prompted additional US military strikes.
US Secretary of State Marco Rubio said Washington remains open to diplomatic negotiations but insisted Iran must halt attacks affecting shipping around the Strait of Hormuz. Ongoing disruptions to oil flows have pushed the average US gasoline price above $4 per gallon, adding fresh inflationary pressure.
Rising fuel costs threaten to undermine recent progress in easing inflation, increasing the likelihood that the Federal Reserve will maintain restrictive monetary policy. Higher interest rates typically reduce the attractiveness of gold because the metal offers no yield.
Cleveland Federal Reserve President Beth Hammack recently signaled that additional rate hikes may be necessary if inflation accelerates. According to Reuters, CME FedWatch data now indicates traders see an 83% probability of a Federal Reserve rate increase by December.
Gold lost roughly 2.6% last week as expectations for tighter monetary policy strengthened alongside higher oil prices. The metal has declined about 4% over the past month but remains nearly 18% higher than its level a year earlier.
The recent weakness follows gold’s strong rally earlier this year, when prices climbed to record highs before retreating as persistent inflation and expectations of tighter monetary policy overshadowed geopolitical support.
For now, gold remains caught between two opposing forces: escalating geopolitical tensions continue to support demand for safe-haven assets, while higher oil prices risk fueling inflation and interest rate increases that could limit the precious metal’s upside.
