Gold prices edged lower on Monday, trading near $4,012 an ounce, as the dual forces of geopolitical risk and rising bond yields kept the precious metal in a narrow range. Despite escalating hostilities between the United States and Iran that boosted crude oil above $90 a barrel, bullion failed to capitalize on safe-haven flows, constrained by a stronger dollar and higher Treasury yields.
Gold Under Pressure Despite Geopolitical Support
Spot gold slipped 0.13% to approximately $4,012.00 during the North American session, after earlier trading between $3,982.20 and $4,040.90. The metal remained below the key $4,023.35–$4,065.83 retracement zone, following another unsuccessful attempt to break above $4,040. August gold futures held near $4,020.
Silver also struggled, trading between $55.40 and $57.60 after rebounding from last week's lows. It remained capped below the $58.53–$59.44 trader-reaction zone that had previously limited downside moves. The muted performance in gold reflects an unusual market dynamic: while intensifying US-Iran hostilities support defensive assets, the resulting rally in crude oil strengthens inflation expectations, which in turn pushes yields higher and reduces the appeal of non-yielding bullion.
Economic Data Tempers Fed Policy Expectations
Market positioning has shifted following the latest US economic data, which has been less dovish than earlier inflation readings suggested. Softer June consumer and producer inflation data initially eased pressure for a near-term Federal Reserve policy move. However, stronger retail sales, lower weekly jobless claims, a sharp rebound in the Philadelphia Fed manufacturing index, and firmer University of Michigan consumer sentiment have kept traders from fully pricing in a shift toward easier monetary policy.
Markets continue to view the Federal Reserve's July 29 meeting as likely resulting in no change to interest rates. However, at least one additional rate hike later this year remains priced into expectations as energy prices continue to rise. The benchmark 10-year US Treasury yield traded near 4.57%, while the US Dollar Index (DXY) strengthened to around 100.87. The combination of higher yields and a firmer dollar continued to cap gains in gold despite ongoing geopolitical uncertainty. For more on how broader markets are reacting, see our coverage of global FX markets staying range-bound as traders eye inflation data and oil price risks.
Strait of Hormuz Tensions Keep Energy Markets in Focus
The situation around the Strait of Hormuz remained a major focus for financial markets. Shipping activity through the strategic waterway has largely stalled amid ongoing military pressure. The United States launched another round of strikes targeting Iranian military command centres, coastal surveillance sites, missile and drone launch sites, and maritime capabilities following the death of another American service member. Iran subsequently retaliated against Bahrain and Kuwait.
As a result, Brent crude climbed back above $90 a barrel, increasing concerns about energy-driven inflation. For gold, the impact remained mixed. Escalating geopolitical tensions continued to support safe-haven demand, but rising oil prices reinforced inflation risks, pushed Treasury yields higher, and reduced demand for non-yielding bullion. The oil surge itself has been dramatic, as detailed in our report on oil surging 12% weekly as Hormuz and Red Sea risks reshape market dynamics.
Outlook and Key Levels
Traders are closely monitoring upcoming Federal Reserve communication, developments in expectations for a possible September rate hike, and any further disruption to shipping through the Strait of Hormuz. The interplay between geopolitical risk and monetary policy will likely continue to drive gold's near-term direction. For now, the metal remains trapped between safe-haven support and yield-driven headwinds, with the $4,000 level acting as a psychological floor and resistance near $4,040–$4,065 capping upside moves. Meanwhile, silver's rebound remains tentative, with the $58.53–$59.44 zone a key hurdle. For a broader perspective on commodity markets, see our analysis of silver's rebound stalling at $57.50 as geopolitical risks and oil surge complicate the outlook.
This article is for informational purposes only and does not constitute financial advice.
