Gold prices experienced a significant decline on July 23, falling more than 2% to trade around $4,047.26 per ounce by 11:51 AM EDT, after reaching a two-week high the previous day. US gold futures for August delivery also slid 2.5% to $4,050. This downturn was largely attributed to escalating tensions in the Middle East, specifically reports of Yemen's Houthis striking Saudi oil tankers, which propelled crude oil prices to $100 a barrel for the first time since late May. The surge in energy costs intensified inflation concerns.
The rising oil prices and subsequent inflation fears have led to increased expectations that the US Federal Reserve will raise interest rates. Money markets are now pricing in approximately an 83% probability of a Fed rate hike in September, according to the CME FedWatch Tool, a notable increase from 68% on July 22. Thishawkish sentiment from the Fed typically weighs on non-yielding assets like gold, making interest-bearing investments more attractive.
Adding to the pressure on gold, the benchmark 10-year US Treasury yield rose to about 4.71%, marking its highest level since January 2025. A stronger US dollar, which gained 0.3%, also made dollar-denominated gold more expensive for international buyers. Analysts like Jim Wyckoff from American Gold Exchange noted that higher crude oil prices push up bond yields due to expectations that central banks will struggle to lower interest rates amid problematic inflation, and rising bond yields are detrimental to gold and silver market bulls because these metals offer no yield.
TD Securities cautioned that the current higher rate environment suggests gold might retreat further, potentially dropping back to a support level of around $3,900 per ounce before any new highs could be seen approximately twelve months from now. Other precious metals also saw declines, with spot silver sliding 3.6% to $57.53 per ounce, platinum falling 3.1% to $1,593.22, and palladium dipping 2.3% to $1,261.00.
