Gold Prices Slip as Oil Rally Fuels Fed Rate Concerns Ahead of US Inflation Data
Investing.com – Gold prices extended their decline on Monday as renewed military strikes involving the United States and Iran over the weekend pushed crude oil prices higher, reigniting inflation concerns and reinforcing expectations that the Federal Reserve could maintain a hawkish monetary policy for longer.
As of 12:05 WIB (05:05 GMT), spot gold (XAU/USD) fell 1.54% to $4,057.76 per ounce, while Gold Futures dropped 1.17% to $4,065.45 per ounce. Silver (XAG/USD) declined 2.80% to $58.19 per ounce, and platinum (XPT/USD) slipped 1.61% to $1,604.60 per ounce.
Middle East Conflict Drives Oil Higher and Revives Inflation Risks
Geopolitical tensions intensified over the weekend after the United States launched fresh strikes on Iranian targets following an attack on a Cyprus-flagged cargo vessel in the Strait of Hormuz. While Tehran announced that the strategic shipping route would remain closed until further notice, U.S. officials rejected the claim, underscoring the fragile state of ceasefire negotiations.
Oil prices remained sharply elevated after surging nearly 3%, reflecting investor concerns that escalating conflict could disrupt crude shipments through the Strait of Hormuz, a vital passage responsible for roughly 20% of global oil supplies.
The continued rise in energy prices has revived fears of another inflationary shock, increasing expectations that the Federal Reserve may keep interest rates higher for longer. Higher bond yields and a stronger U.S. dollar typically reduce the appeal of non-yielding assets such as gold.
Minutes from the Fed's June policy meeting, released last week, revealed that several policymakers still see a case for additional rate hikes, while many officials expressed greater concern over persistent inflation despite easing worries about the labor market. The Federal Reserve's next policy meeting is scheduled for July 28–29.
US CPI Report and Fed Testimony in Focus
Investors are now turning their attention to Tuesday's U.S. Consumer Price Index (CPI) report and the first congressional testimony by Federal Reserve Chair Kevin Warsh, both of which are expected to provide fresh clues on the future direction of U.S. interest rates.
According to Tony Sycamore, Market Analyst at IG, gold remains highly sensitive to both geopolitical developments and incoming U.S. inflation data.
Sycamore noted that gold found strong support near the key psychological $4,000 level last week. If prices can establish a sustained move above the $4,200–$4,220 resistance zone, it could pave the way for a broader recovery toward the 200-day moving average near $4,491.
However, he cautioned that a stronger-than-expected CPI reading could reinforce expectations for another Federal Reserve rate hike before the end of the year, boosting the U.S. dollar and placing additional downward pressure on bullion. Conversely, softer inflation data could help stabilize gold after its recent losses.
Meanwhile, the U.S. Dollar Index (DXY) edged 0.3% higher on Monday, adding further pressure on dollar-denominated gold prices.