Gold declined to a two-week low on Tuesday as the U.S.-Iran conflict in the Gulf caused oil prices to surge, heightening inflation concerns. This was compounded by hawkish comments from Federal Reserve Governor Christopher Waller, which further solidified expectations for increased U.S. interest rates. Spot gold experienced a decline of 0.2%, trading at $3,993.83 per ounce as of 0110. This follows a drop of approximately 3% in the previous session, marking its most significant daily percentage decrease in over a month. U.S. gold futures for August delivery remained unchanged at $4,000.70.
The U.S. military executed a third consecutive night of strikes against Iran on Monday, coinciding with two tankers coming under fire in the Strait of Hormuz. This escalation follows U.S. President Donald Trump’s announcement regarding the reinstatement of Washington’s blockade on Iranian shipping in the Gulf. Oil futures reached their peak since mid-June, experiencing a notable increase of approximately 9% in the prior session. Concurrently, U.S. Treasury yields and the dollar advanced as tensions between the United States and Iran flared up once again over the weekend.
Investors will closely monitor the June U.S. CPI data set to be released later today for new insights into inflation and the Federal Reserve’s policy trajectory. Additionally, PPI data and Fed Chair Kevin Warsh’s inaugural semiannual testimony before Congress this week will also attract attention. The U.S. central bank may need to raise interest rates “in the near term” if coming data show inflation continuing well above the 2% target, Waller said on Monday, in remarks that characterised monetary policy as being at a “crossroads.”
Traders have increased their positions regarding a potential interest rate hike in the U.S. for September, as indicated by the CME Group’s FedWatch Tool, which reflects a probability increase to approximately 78% from 57% just a week prior. The European Union announced on Monday new sanctions against Sudan, specifically targeting the country’s gold trade, which it stated was being utilised to finance the military conflict within the nation. Elsewhere, spot silver declined 1.2% to $56.98 per ounce, having earlier touched a two-week low. Platinum declined by 1% to $1,589.35, while palladium experienced a slight decrease of 0.4%, settling at $1,242.54.