Gold holds near $4,000 as Fed rate expectations offset safe-haven demand
Gold prices were broadly stable on Monday as investors balanced rising geopolitical tensions between the United States and Iran against expectations that higher energy prices could encourage the Federal Reserve to keep interest rates elevated for longer.
At 22:17 ET (02:17 GMT), XAU/USD was up 0.1% at $4,020.63 an ounce, while Gold Futures gained 0.8% to $4,030.2. Silver also strengthened, with XAG/USD rising 1.8% to $56.97 an ounce, while platinum edged 0.2% higher to $1,598.45.
Rising Middle East tensions keep inflation risks in focus
Gold remained under pressure after falling more than 2% last week, as traders assessed whether the renewed conflict in the Middle East could prolong inflationary pressures despite recent evidence of easing U.S. inflation.
Brent crude climbed above $90 a barrel after military activity between the United States and Iran intensified over the weekend. The latest developments included an attack on a major oil facility in Kuwait and strikes involving vessels travelling through the Strait of Hormuz, heightening concerns over global energy supplies.
Iran said the ceasefire with the United States had effectively broken down, increasing the likelihood of prolonged disruption along one of the world’s most important oil transport routes.
Now in its fifth month, the conflict has supported gains across energy and industrial commodity markets, while uncertainty surrounding U.S. President Donald Trump’s approach toward Iran continues to influence investor sentiment and the broader economic outlook.
Investors continue to monitor the Federal Reserve
Recent U.S. inflation and employment figures have suggested that the economy is losing some momentum, but markets remain focused on whether rising oil prices could complicate the Federal Reserve’s efforts to bring inflation back under control.
Persistently higher energy costs could keep inflation above the Fed’s target for longer, potentially requiring policymakers to maintain restrictive monetary policy. Elevated interest rates generally strengthen Treasury yields and the U.S. dollar, reducing the appeal of non-interest-bearing assets such as gold.
ANZ analysts said last week’s escalation in the Middle East briefly lifted market expectations of a Federal Reserve rate increase at the July 29 meeting to around 40% before those expectations eased back to roughly 10%, highlighting gold’s sensitivity to changes in the interest-rate outlook.
The bank added that the threshold for another rate increase remains high and continues to expect the Federal Reserve to leave rates unchanged this year. It argued the central bank is likely to look through higher energy prices unless they trigger broader second- and third-round inflationary effects. ANZ also expects gold to find support between $3,800 and $4,000 an ounce as expectations for further monetary tightening gradually diminish.
