Gold fell more than one percent in early Asian trading on Monday as fears over the closure of the Strait of Hormuz drove oil prices sharply higher, stoking inflation concerns and prompting traders to recalibrate interest rate expectations.
Spot gold dropped 1.2 percent to $4,072.78 per ounce by 00:50 GMT. US gold futures for August delivery fell 0.8 percent to $4,081.70.
The move came after Iran announced it had again closed the Strait of Hormuz following an intensification of US-Iranian exchanges involving missiles and drones over the weekend. Tehran also targeted American installations in several Gulf states on Sunday. Oil prices jumped around four percent in response, the dollar strengthened, and equity markets across Asia fell.
Higher oil prices feed directly into inflation, which in turn raises the prospect of tighter monetary policy — a headwind for gold, which bears no yield.
The Federal Reserve’s semi-annual monetary policy report to Congress on Friday acknowledged that inflation in the United States “increased further this spring,” with the Fed citing rising tariff effects, war-related energy cost increases, and AI infrastructure development as compounding price pressures that had already become entrenched last year.
Markets will be watching closely this week when Fed Chair Kevin Warsh delivers his first semi-annual testimony to Congress, alongside the release of US June consumer price index, producer price index, and retail sales data — all of which could shape expectations for the Fed’s next move.
Demand signals from Asia were mixed heading into the week. Gold traded at a notable discount in India last week due to price volatility, while Chinese demand held steady. The People’s Bank of China reported in June its largest monthly increase in gold reserves in more than two and a half years.
Other precious metals fell alongside gold. Silver dropped 1.6 percent to $58.89 per ounce, platinum slid 1.1 percent to $1,610.22, and palladium declined 1.3 percent to $1,260.15.
