(Bloomberg) — Gold edged down as renewed geopolitical risks stoked concerns about inflationary pressures that could make the Federal Reserve hike interest rates, a headwind for the precious metal.
Bullion fell 0.5% as escalating tensions in the Middle East sent US crude above $85 a barrel and Treasury yields higher. Elevated energy costs mean that the US central bank may need to raise rates to contain price pressures. Higher rates are typically negative for non-yielding gold.
The precious metal tumbled in the prior session as Fed Chairman Kevin Warsh’s hawkish speech where he vowed to fight inflation, with traders pricing in a more than 60% chance of a hike at the central bank’s next meeting in September.
Bullion is still up around 10% in August, heading for the biggest monthly gain since January, with prices surging after the US Treasury’s surprise announcement mid-month to ramp up bond buybacks. The intervention to rein-in borrowing costs revived the so-called debasement trade, driven by concerns over rising sovereign debt and currency devaluation, a theme that helped fuel gold’s 65% rally in 2025.
The dovish Treasury and hawkish Federal Reserve are in a “tug of war,” Nicky Shiels, head of research and metals strategy at MKS PAMP SA, said in a note. The debasement trade is likely to continue into September as the Treasury starts bond buybacks and ahead of the Fed meeting, which will support gold, she added.
The US and Iran exchanged strikes for the first time in about a month as American forces hit an island in the Strait of Hormuz and the Islamic Republic responded by launching attacks on the United Arab Emirates and Jordan. US President Donald Trump told Fox News on Monday morning that the US would respond to Iran’s attacks on US forces, without giving details.
Spot gold was 0.5% lower at $4,434.78 an ounce at 1:12 p.m. in New York. Silver was down 0.1% at $66.30 an ounce. Platinum and palladium both fell. The Bloomberg Dollar Spot Index, a gauge of the US currency, was down 0.2%.
–With assistance from Wendy Wells and William Clowes.
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