Gold dropped below $4,154 per ounce after spot opened near $4,269. Silver fell even more, down about 5%. Platinum and palladium also declined. The dollar index rose 0.2%, and Treasury yields climbed, which dulled interest in precious metals. The sell-off intensified amid a stalemate in US-Iran talks over the Strait of Hormuz, keeping energy prices elevated and maintaining pressure on the Federal Reserve to raise rates again.
Why is gold falling even though the Washington-Tehran war has entered its eighth month? Because the interest-rate channel is outweighing the safe-haven channel. Oil is rising due to lack of progress on Hormuz, expensive energy feeds inflation, and inflation forces the Fed to keep tightening. Today's decline was fairly large, indicating the market is still digesting recent diplomatic disappointments.
The metal is down nearly 6% month-to-date, linked to the Fed's decision. This month the central bank, for the first time since 2023, raised rates to rein in persistent inflation and signaled further hikes are possible. As a result, Treasury yields rose sharply, and the market now prices roughly a 68% chance of a rate hike in October. Previously, traders had been pricing at least one more 25-bp increase by year-end. Winners are dollar and bond holders earning higher yields; losers are gold and silver holders, who receive no yield.
Comments from US officials are also telling. Cleveland Fed President Beth Hammock said Friday that the rise in long-term yields reflects stronger growth prospects, debt concerns and expectations of further rate hikes. Treasury Secretary Scott Bessent urged over the weekend that policymakers remain open-minded on rates, arguing productivity gains from AI and deregulation could restrain inflation. Ironically, that call for flexibility came right after the first rate increase in three years and amid expectations of another.
The main systemic risk remains Hormuz. Without a diplomatic breakthrough, inflation worries and rate expectations will continue to weigh on metals, and the market will look to upcoming PCE inflation data and US labor reports later this week for guidance.
I believe gold will remain under pressure in the near sessions, and the risk of further decline below $4,125 remains while oil stays expensive and yields rise. Silver will likely continue to underperform gold. A reversal is possible only with a real negotiated breakthrough that brings oil down and eases rate pressure — a scenario that currently looks unlikely.
Technical picture: buyers need to take the nearest resistance at $4,186 to target $4,249, above which a breakout would be difficult. The farther target is $4,304. On a decline bears will try to seize control of $4,124; if they succeed, a range break would severely damage bulls and push Gold toward $4,062 with the prospect of reaching $4,047.