Gold Stumbles as Oil Price Surge and Hawkish Fed Outlook Weigh on Markets

Spot gold traded near $4,446.50 an ounce, shedding 0.18% as the market digested a 66.1% probability of a September rate hike—a significant jump from 57% just days prior. The shift in sentiment follows a stern address by Fed Chair Kevin Warsh, which, combined with the U.S.-Iran military friction near the Strait of Hormuz, has pushed the 10-year Treasury yield to 4.75%. While geopolitical instability usually invites safe-haven buying, the current environment presents a paradox: the threat of higher inflation from surging oil prices is forcing traders to price in more aggressive monetary tightening, which in turn diminishes the appeal of non-yielding assets like gold.

North American and European markets mirrored this defensive posture, with the Dow Jones Industrial Average dropping 0.7% and Germany’s DAX retreating 1.17%. Technical indicators suggest gold remains under pressure, currently trading below its short-term moving averages. Although buyers have emerged on dips to prevent a breach of the $4,395.80 session low, the metal faces a difficult climb back to the $4,487 resistance level. Investors are now turning their attention to a dense week of economic data, including Tuesday’s JOLTS job openings and Friday’s nonfarm payrolls, which will serve as the next litmus test for the Fed’s trajectory.