1 day ago
Gold Slips as Mideast Tensions Sustain Federal Reserve Hike Bets
Gold became slightly cheaper because investors worried that fighting in the Middle East could make energy more expensive.
Higher energy prices can cause broader prices to rise.
That might encourage the Federal Reserve to raise interest rates.
Higher rates can make gold less attractive because gold does not pay interest.
Investors also reacted to a hawkish speech by Kevin Warsh.
Even so, gold is still up about 10% this month.
Gold has benefited from concerns about government debt and currency values.
The United States and Iran also exchanged attacks, adding to market uncertainty.
Spot gold fell 0.5% to $4,434.78 an ounce as Middle East tensions pushed oil and Treasury yields higher.
US crude rose above $85 a barrel, reviving concerns that energy costs could fuel inflation and encourage a Federal Reserve rate hike.
Traders priced in a more than 60% chance of a rate increase at the central bank’s September meeting after Kevin Warsh’s hawkish speech.
Gold remains up about 10% in August, potentially its strongest monthly gain since January, following the Treasury’s bond-buyback announcement.
The United States and Iran exchanged strikes, while President Donald Trump said the United States would respond to attacks on its forces.
- Who
- Gold traders, the Federal Reserve, the United States, Iran, and President Donald Trump were central to the report.
- What
- Gold fell as Middle East tensions lifted oil prices and Treasury yields, keeping expectations of a Federal Reserve rate hike alive.
- Where
- The market reaction occurred in New York, while reported strikes involved the Strait of Hormuz, the United Arab Emirates, and Jordan.
- When
- The report describes trading on Monday and says traders are focused on the Federal Reserve’s September meeting.
- Why
- Higher energy costs may intensify inflation and prompt higher interest rates, which are typically negative for non-yielding gold.
Forces Supporting Gold
Forces Pressuring Gold
Treasury policy and debt concerns
Forces Supporting Gold
The Treasury’s planned bond buybacks and concerns about sovereign debt and currency devaluation could continue supporting the so-called debasement trade and gold.
Forces Pressuring Gold
The report does not identify a direct opposing Treasury argument, but lower borrowing costs from buybacks coexist with concerns that inflation could remain elevated.
Middle East tensions
Forces Supporting Gold
Geopolitical risk can increase demand for gold as a perceived safe-haven asset, and continued tensions may support prices.
Forces Pressuring Gold
The conflict pushed crude oil above $85 a barrel, potentially increasing inflation and strengthening expectations for higher interest rates, which can weigh on gold.
Federal Reserve policy
Forces Supporting Gold
Analyst Nicky Shiels said the debasement trade could continue into September and support gold ahead of the Federal Reserve meeting.
Forces Pressuring Gold
Kevin Warsh’s hawkish remarks and more than 60% odds of a September rate hike increased pressure on gold because higher rates reduce the appeal of a non-yielding asset.
Key facts
- Gold price
- Spot gold was down 0.5% at $4,434.78 an ounce at 1:12 p.m. in New York.
- Monthly performance
- Gold was up around 10% in August, heading for its biggest monthly gain since January.
- Oil price
- US crude rose above $85 a barrel.
- Rate-hike expectations
- Traders priced in a more than 60% chance of a Federal Reserve hike at its next meeting in September.
- Other metals
- Silver fell 0.1% to $66.30 an ounce, while platinum and palladium also declined.
- Recent gold rally
- Gold has gained 65% in 2025, according to the report.
- Market forces
- The Treasury’s bond-buyback plans supported gold, while the Federal Reserve’s inflation stance pressured it.
Sources
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