During Monday's US trading session, spot gold and silver prices experienced significant declines. Renewed escalations in the Strait of Hormuz between the US and Iran pushed crude oil prices higher, subsequently lifting US Treasury yields. This has fueled market concerns that energy-driven inflation could compel the Federal Reserve to maintain a restrictive monetary policy stance for an extended period. Spot gold fell to a low of $4,055.40 per ounce, marking an intraday drop of 1.55%. Spot silver traded around $58.36, down 2.35%.
Following last Thursday's release of June employment data and Wednesday's Fed meeting minutes, the market's positioning has become far less supportive for gold compared to the immediate aftermath of the non-farm payrolls report. The June report showed a modest addition of 57,000 jobs, with the unemployment rate steady at 4.2%. Figures for April and May were also revised down by a cumulative 74,000. Initially, this data weakened expectations for further Fed rate hikes. However, the Fed minutes refocused attention on inflation risks, a view solidified by Monday's sharp rise in oil prices. As of 7:17 AM ET, the yield on the 10-year US Treasury note hovered near 4.582%, while the 2-year yield surpassed 4.20%. Market pricing indicates roughly a 68% probability of a Fed rate hike in September. While the employment data provided a floor for gold prices, rising inflation and higher Treasury yields are constraining investors from adding further bullish gold positions.
Market Dynamics and Geopolitical Context
The current situation in the Strait of Hormuz can be characterized as follows: while shipping continues, military posturing from both sides persists, creating an unstable maritime environment, though the strait has not been completely blockaded. After a series of incidents over the weekend, both the United States and Iran have asserted control over the waterway. The US has stated it will uphold freedom of navigation, while Iran claims the right to regulate vessel passage and potentially levy fees. The number of transiting tankers has dropped significantly. Following Iranian threats to close the strait and subsequent US strikes on Iranian targets, oil prices surged. Typically, such geopolitical conflict would support gold, but macroeconomic factors have offset safe-haven buying: rising oil prices exacerbate inflation concerns, Treasury yields remain elevated, and the US dollar strengthens. Looking at the broader market, the picture shows strength in crude oil, pressure on bonds, weakness in US equities, and selling in precious metals.
Key Factors for Traders to Watch
Traders will now focus intently on this week's CPI inflation data, Congressional testimony from Federal Reserve Governor Kevin Warsh, and any further disruptions to shipping in the Strait of Hormuz. Should the CPI data come in softer than expected, leading to a decline in real yields, gold may have an opportunity to retest the resistance zone between $4,091 and $4,107. Conversely, another sharp spike in oil prices would keep the market's focus firmly on inflation and the Fed's subsequent policy path.
Overview of Other Markets
In related markets, NYMEX WTI crude oil surged, trading around $72.90 per barrel. Brent crude was near $79.60 per barrel. The US Dollar Index strengthened. The benchmark 10-year US Treasury yield was fluctuating around 4.58%.
Technical Perspective on Gold
The gold price is trading below its 50-period Exponential Moving Average (around $4,107), with bears holding the short-term advantage. The price is testing a potential breakdown from a symmetrical triangle pattern.
Bullish targets require a sustained move above $4,091, with a further push towards $4,107 and then $4,140.
Bearish targets are a break below $4,000, with deeper support levels at $3,959 and then $3,942.
Immediate resistance is at $4,091, followed by $4,107. Immediate support is at $4,000, followed by $3,959.
Technical Perspective on Silver
Silver is trading below the resistance level of $61.71 and its 50-period EMA at $62.81, putting bears in control for the near term.
Silver bulls need to see a move above $59.36 to target $61.71 and then $62.81.
Bearish targets are a break below $58, looking towards $57 and then $55.60.
Immediate resistance is at $59.36, followed by $61.71. Immediate support is at $58, followed by $57.
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