Gold prices declined significantly, dropping below $4,000 an ounce after the US and Iran exchanged attacks in the Persian Gulf. This renewed tension strained a recent ceasefire, which had previously cooled energy prices and eased expectations for interest rate hikes. Spot gold fell as much as 1.8% to $3,943, marking its lowest intraday level since November, having already given up almost 2% in the previous session. The precious metal has lost approximately 25% since the conflict began in late February, breaking key technical support levels.
The heightened geopolitical risks are fueling inflation concerns. Although oil prices had recently retreated, the weekend's tit-for-tat attacks, including a strike on a tanker carrying Qatari crude in the Strait of Hormuz, caused oil to advance. This resurgence in energy prices reinforces expectations that central banks will maintain higher interest rates for longer, creating headwinds for non-yielding assets like gold.
Analysts note that while easing geopolitical tensions and lower oil prices could alleviate inflation risks, the market is prioritizing renewed US rate-hike expectations and a stronger US dollar, both of which increase the opportunity cost of holding gold. The US dollar has gained over 2% this month, making dollar-denominated gold more expensive for international buyers. Traders are now assigning a 59.7% probability to a Fed rate increase as early as September 2026. Negotiations between Washington and Tehran are scheduled to resume in Doha, though Iran's foreign ministry has stated it will send an expert delegation but ruled out direct talks.
Technically, the selling pressure on gold has accelerated after prices broke below recent key support levels. This has transformed what initially appeared to be profit-taking into a deeper short-term momentum unwind. Despite the renewed tensions, some analysts suggest that gold holding above $4,000 in certain instances indicates that marginal dip buyers are returning and willing to defend this price, expecting gold to become more resilient to Middle East volatility as year-to-date gains have been erased and fast-money investors have likely exited.
