The global gold market is experiencing significant volatility. In mid-July 2026, as the US-Iran conflict escalated sharply, security concerns in the Strait of Hormuz became the primary uncertainty for the global energy supply chain, placing notable downward pressure on gold prices. While geopolitical risks typically favor traditional safe-haven assets like gold, current fears over inflation triggered by surging oil prices and reinforced expectations for Federal Reserve interest rate hikes have temporarily overshadowed gold's appeal. Last Friday, spot gold saw a slight decline to around $4119 per ounce, and it broke below the key $4100 level at the start of this week. As of 07:40, it touched a low of $4068.57 per ounce, reflecting a complex and cautious market sentiment.
Escalating Geopolitical Conflict: Oil and Inflation Pressures Temporarily Mute Gold's Safe-Haven Role
The intensity of the current US-Iran confrontation has surpassed prior market expectations. The US conducted multiple rounds of precision strikes on Iranian military targets in response to attacks on commercial vessels in the Strait of Hormuz, while Iran expanded its retaliatory strikes to facilities in several Gulf nations and announced the closure of this critical global oil transit chokepoint. The conflict directly fueled a weekly rise in international oil prices, with US crude oil surging nearly 4% at one point. The rapid increase in energy costs quickly translated into higher inflation expectations.
The rise in energy costs directly intensifies global inflationary pressures, which has become the core factor suppressing gold prices. Bart Melek, Global Head of Commodity Strategy at TD Securities, noted that the primary driver is the renewed escalation of US-Iran tensions, with investors currently showing a general reluctance to hold gold and silver, pushing prices back toward the $4100 level. Previous forecasts from the International Energy Agency predicting a significant oil market surplus next year may be completely upended by this round of conflict, as supply concerns now dominate the market narrative.
The Strait of Hormuz handles approximately one-fifth of global oil and natural gas trade, and the risk of shipping disruptions has sharply increased uncertainty within the energy supply chain. While the US military has emphasized that the strait remains open to legitimate vessels, actual transit volume has significantly decreased. Combined with the cycle of retaliatory Iranian attacks and continued US airstrikes, a clear path to de-escalation appears unlikely in the short term. In this context, the traditional logic of gold as a safe-haven asset is being temporarily suppressed by the dual pressures of inflation and anticipated rate hikes, leading to a clear downtrend in its price.
Tightening Monetary Policy Expectations: Probability of September Fed Rate Hike Soars to 74%
Inflationary concerns stemming from rising energy prices have directly strengthened market expectations for tighter US monetary policy. According to the latest data from the CME FedWatch Tool, traders now assign a roughly 74% probability to a Federal Reserve rate hike in September, with the probability of a hike within the year rising to 88%. This shift in expectations poses a significant headwind for gold, as a higher interest rate environment increases the opportunity cost of holding the non-yielding asset.
Market focus this week will be intensely concentrated on the congressional testimony of the new Fed Chair, Warsh, and a series of key inflation and economic data releases. Tuesday's US CPI report for June, Wednesday's PPI and manufacturing data, Thursday's retail sales and jobless claims figures, and Friday's housing starts data will all provide clearer guidance on the monetary policy path. Investors are trying to assess whether the energy price shock is temporary or could evolve into persistent inflationary pressure. If the data confirms that inflation is sticky, the Fed's hawkish stance may solidify further, potentially prolonging the short-term pressure on gold prices.
Analyst Views Diverge: Short-Term Bearishness Prevails, Long-Term Potential Up to $4700 Remains
Market participants hold differing views on gold's near-term outlook. Kitco News's weekly gold survey shows a split among Wall Street analysts: some experts maintain neutral or bearish stances, believing gold lacks catalysts for excitement amid the ongoing Iran conflict and upside oil risks. David Pavilonis, Senior Commodity Broker at StoneX Group, stated bluntly that the gold chart "looks really bad" and could weaken further, potentially testing the $3800-$3600 range or lower if recent lows are breached. He also noted that capital is flowing out of the precious metals market into other sectors, with demand from Asia providing only temporary support and a lack of positive feedback loops in the market.
However, some voices remain optimistic. Mark Leibovit, publisher of the VR Metals/Resource Letter, is bullish on the medium-to-long-term outlook, suggesting gold could challenge the $4700-$4800 per ounce range in the coming weeks. Sentiment among Main Street retail investors is similarly divided, with some still waiting for more compelling reasons to buy rather than simply attempting to time the bottom.
From a technical perspective, gold is currently in a slow downtrend channel, hovering near a key support zone with a risk of significant sell orders accumulating. However, a technical rebound could materialize if substantive signals emerge for a de-escalation in the geopolitical conflict or if inflation data comes in softer than expected.
Outlook: Short-Term Pressure Persists, Geopolitics and Policy to Dictate Gold's Path
In summary, the gold market currently faces a squeeze from both geopolitical risk premiums and expectations for tighter monetary policy. The ongoing escalation of the US-Iran conflict injects uncertainty into oil prices and inflation, while this week's heavy slate of Fed-related data and testimony will serve as a key barometer for market sentiment. In the short term, gold may continue to oscillate within the $4000-$4200 range, potentially testing even lower support levels. However, from a medium-to-long-term perspective, factors such as the potential for prolonged geopolitical conflict, global energy transition pressures, and central bank gold-buying trends continue to provide a solid foundation for potential price appreciation.
Investors should closely monitor the latest developments regarding the Strait of Hormuz situation and the Federal Reserve's actual policy signals. In the current environment where risks and opportunities coexist, gold's "safe-haven" properties have not disappeared; they are merely temporarily masked by the more immediate logic of rising interest rates. Should any of these key variables shift, this slumbering "golden beast" could rapidly awaken and stage a strong rebound. It is advisable for investors to remain cautious, adjust positions flexibly based on macroeconomic data and geopolitical developments, and look for potential buying opportunities on dips.
As of 07:42, spot gold is trading at $4077.35 per ounce.
Comments