Key Takeaways:
Gold edged lower in early Asian trading on Monday as renewed military strikes between the United States and Iran fueled expectations the Federal Reserve will maintain elevated interest rates to contain stubborn inflation.
"Renewed hostilities in the Middle East raise the prospect of the Federal Reserve keeping interest rates higher for longer to combat stubbornly high inflation," analysts at ANZ said.
COMEX gold slipped to around $2,378 an ounce, down 0.3% from Friday's close, as traders weighed the dual dynamics of geopolitical risk and tighter monetary policy. The precious metal has traded in a wide range since the U.S.-Iran conflict escalated in late February, peaking above $2,500 during the initial outbreak of hostilities before retreating as the dollar strengthened.
The latest decline comes after the U.S. military struck 90 targets across six Iranian provinces on July 7-8, including coastal radar installations, anti-ship missile batteries and IRGC fast-attack craft near Bandar Abbas and Chabahar Port, according to U.S. Central Command. Iran retaliated with ballistic missile and drone salvos targeting Western military facilities in Bahrain, Kuwait, Qatar and Jordan. The tit-for-tat exchanges killed at least 17 people and wounded 115 others in Iran, the Iranian Health Ministry said.
Strait of Hormuz Disruption Deepens
The renewed fighting has effectively closed the Strait of Hormuz, a 21-mile-wide chokepoint that handles roughly 20% of the world's daily petroleum and liquefied natural gas transit. The UN International Maritime Organization has advised all commercial vessels to halt transit through the waterway, leaving about 6,000 seafarers stranded aboard hundreds of trapped ships. The UN has evacuated nearly 2,900 crew members from the highest-risk zones.
Brent crude held near $77 a barrel on Monday, well below the wartime peak of $120 reached in March but still elevated compared to the pre-conflict baseline of around $70-$72. The International Energy Agency warned the renewed hostilities risk undermining efforts to rebuild depleted global oil inventories.
Gold's Competing Forces
For gold, the conflict creates opposing pressures. Escalation typically drives safe-haven buying that supports prices, but the accompanying inflation risk pushes the Fed toward a tighter stance, strengthening the dollar and weighing on bullion. The U.S. dollar index held near recent highs on Monday, reflecting the hawkish repricing of rate expectations.
Gold at current levels is roughly 5% below its all-time high of $2,500 an ounce set in March 2026 during the war's opening weeks, and about 8% above the pre-conflict level of $2,200. The next major catalyst for the precious metal will be the outcome of U.S.-Iran back-channel talks in Oman, where Iranian Foreign Minister Abbas Araghchi met his Omani counterpart on Saturday to discuss mechanisms for ensuring safe passage of ships through the strait.
This article is for informational purposes only and does not constitute investment advice.
