Gold and silver prices have fallen, as renewed attacks between the United States and Iran over the weekend pushed energy prices higher and once again increased market expectations that central banks will raise interest rates to curb inflation.
Spot gold prices fell as much as 1.6%, approaching $4,050 per ounce, after having declined 1.4% last week. The navigation situation in the Strait of Hormuz remains chaotic, with the US denying Iran's claim that the waterway is closed until further notice. US Central Command stated that American forces conducted a strike, their fourth within a week, in response to an attack on a container ship.
For gold traders, the escalation of conflict has raised concerns that the Federal Reserve may need to keep interest rates higher for longer to address persistent inflation. Minutes from the Fed's June meeting revealed that a few policymakers saw a case for raising rates, though they ultimately supported the decision to hold them steady.
Overall, the minutes reflected growing concern about inflation among US central bank officials, alongside a slight easing of worries about the labor market. As precious metals do not generate yield, higher borrowing costs are typically a headwind for them. On Monday, silver prices dropped as much as 3.1%.
Hebe Chen, an analyst at Vantage Markets in Melbourne, said the resurgence of geopolitical tensions is hitting an already fragile gold market. She stated that unless the conflict around the Strait of Hormuz genuinely subsides and opens a new chapter for the precious metals market, high oil prices, rising yields, and a stronger US dollar could continue to pressure gold this week.
Spot gold was down 1.5% at $4,058.18 per ounce, while silver fell 2.9% to $58.11 per ounce. Platinum and palladium prices also declined, and the Bloomberg Dollar Spot Index rose 0.2%.
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