US-Iran Tensions Push Oil Prices and Rate Hike Expectations Higher, Gold Turns Lower
Miles Bennett
Oil jumped nearly 3% after the U.S. launched fresh strikes on Iran, pushing the implied probability of a September Fed rate hike past 67%. Spot gold slipped to $4,100.32 an ounce — rising rate expectations are squeezing the metal's appeal.
What happened between the U.S. and Iran?
The U.S. military launched a new wave of strikes on Iran on Tuesday and revoked licenses allowing Iranian oil sales.
Three oil tankers had already been attacked in the Strait of Hormuz, putting an already fragile ceasefire under further strain.
This means → the most critical oil-transit chokepoint in the Middle East faces a direct threat, sharply raising supply uncertainty.
Oil surged — so why did gold fall?
U.S. crude jumped nearly 3% in early trading; the dollar climbed to its weekly high — both strengthened in tandem.
The oil rally reignited inflation fears. The CME FedWatch tool showed the probability of a September rate hike rising from about 57% to over 67%.
In plain terms = gold pays no interest. The higher rates go, the greater the "opportunity cost" of holding it — so money tends to flow out of gold.
Spot gold fell 0.1% to $4,100.32; August futures dropped 1.1% to $4,112.50.
What comes next from the Fed?
Markets are waiting for the minutes of the June 16–17 FOMC meeting, due Wednesday. They may shed light on the rate path under new Chair Kevin Warsh.
A Tuesday report from the New York Fed showed U.S. consumers' near-term inflation concerns intensified in June, reinforcing expectations that rates stay elevated.
This means → if the minutes strike a hawkish tone, gold faces further short-term downside.
What are China and Hong Kong doing in the gold market?
The PBOC's June gold-reserve increase was the largest single-month addition in two and a half years — yet gold still fell on the day.
This reflects a long-term strategic allocation; central-bank buying alone cannot offset the selling pressure from rising rate expectations in the short run.
Hong Kong formally launched a gold central clearing system, restarted USD-denominated gold futures, and is studying a yuan-denominated gold futures contract — aiming to position itself as a regional precious-metals hub.
How did other precious metals fare, and what are the key variables ahead?
Silver fell 0.3% to $59.82/oz, platinum dropped 1.2% to $1,620.38, and palladium slid 1.6% to $1,256.25 — the sector weakened across the board.
In plain terms = rising rate expectations weigh not just on gold but on every non-yielding asset.
The key variables ahead: whether U.S.–Iran tensions escalate further and the tone of the FOMC minutes — these two threads will shape gold's near-term direction.
Content is for reference only, not financial advice.