Gold prices advanced sharply on Wednesday, with spot metal trading near $4,418, up 1.46%, as escalating US-Iran tensions prompted investors to seek refuge in traditional safe-haven assets. Silver also rallied, gaining 2.46% to $67.37, reflecting broad-based demand for precious metals amid geopolitical uncertainty.
Oil surge and dollar weakness underpin metals
Brent crude climbed above $100 per barrel, touching $100.72, while West Texas Intermediate (WTI) rose to $95.70. The spike in oil prices, triggered by US strikes on Iranian oil tankers, added to inflationary pressures and heightened risk aversion. Meanwhile, the US dollar softened against major currencies, making gold and silver more affordable for international buyers and providing additional support to the metals.
Despite these supportive factors, Treasury yields remained elevated, with the 10-year yield hovering near 4.81%—its highest level since October 2023. Higher yields typically weigh on non-yielding assets like gold and silver, but the current geopolitical backdrop has overshadowed that headwind for now.
Strait of Hormuz in focus
Tensions escalated further after Iran attacked US warships in the Gulf of Oman late Tuesday. In response, the US destroyed five Iranian oil tankers, according to a senior US defense official. Unverified reports also emerged that Iranian vessels were preparing to move into the Strait of Hormuz, a critical waterway that carries roughly 21% of global oil supplies. Those vessels later reportedly turned back toward Iran.
The latest incidents follow Saturday's attacks on two US warships in the Gulf of Oman, part of a broader pattern of tit-for-tat strikes between the two nations. The situation remains fluid, with traders closely monitoring any potential disruption to oil flows through the strait.
Inflation data looms large
Market participants are currently pricing in a 60% probability that the Federal Reserve will raise interest rates by 25 basis points at its September 15-16 meeting. That outlook will be tested by two key inflation reports this week: the Producer Price Index (PPI) on Thursday and the Consumer Price Index (CPI) on Friday. Given the recent jump in oil prices, both reports are likely to carry more weight than usual with policymakers and traders.
Analysts describe the setup for metals as mixed. Higher crude prices and elevated yields typically pressure gold and silver, but in the short term, a weaker dollar, safe-haven demand, and uncertainty over Gulf oil supply are offsetting those negative factors. The upcoming inflation data could tip the balance, with a hotter-than-expected reading likely to keep yields elevated and cap the metals' rally, while a softer print could ease rate expectations and open room for gold to break higher.
Key levels to watch
Gold is currently trading between support at $4,347 and resistance at $4,422. A break above resistance could open the door to targets at $4,465 and $4,512, while a drop below support might send prices toward $4,290 and then $4,263. Silver has support at $64.73, with a break lower potentially paving the way to $62.57. On the upside, clearing $67.21 could push prices toward $68.74 and then $70.76.
Traders say gold's near-term direction now hinges almost entirely on Thursday's and Friday's inflation data. The interplay between geopolitical risk and monetary policy expectations will likely determine whether the precious metal can sustain its upward momentum or face renewed selling pressure.
This article is for informational purposes only and does not constitute financial advice.
