Gold slides below $4,050 as U.S.-Iran conflict fuels rate hike expectations

Futures tracking Canada's S&P/TSX Composite edged lower on Thursday as gold prices continued their decline, with investors remaining cautious amid fresh U.S. airstrikes on Iran and persistent uncertainty over the conflict's trajectory.

Gold Under Pressure

Gold fell to around $4,025 per ounce on July 16, extending a multi-day slide. The precious metal has dropped more than 5% over the past month as the U.S.-Iran conflict, counterintuitively, has weighed on bullion by stoking inflation fears and raising expectations for further Federal Reserve rate hikes. Markets are now pricing in roughly a 74% probability of a Fed rate hike in September, diminishing gold's appeal as a non-yielding asset.cnbc+2

The TSX had already lost ground earlier in the week, sinking 52.59 points on Monday to close at 35,252.72, with futures falling 0.3% on Tuesday as investors avoided riskier bets amid the escalating conflict. The S&P/TSX 60 futures trade on the Montreal Exchange TMX Group Limited and had been under pressure throughout the week.finance.yahoo

Middle East Tensions Deepen

The U.S. launched fresh airstrikes on Iran on Wednesday, hitting missile storage and launch sites on Greater Tunb Island in the Persian Gulf near the Strait of Hormuz. The strikes followed a second consecutive day of U.S. bombing earlier in the week that targeted Qeshm Island, Sirik, and Bandar-e Lengeh. Iran had previously responded to U.S. strikes by launching drones at American military positions in Kuwait, Jordan, and Bahrain.dw+3

The escalation has sent oil prices higher, with West Texas Intermediate crude rising above $80 per barrel, adding to inflation concerns that have kept central banks hawkish. President Trump's reinstatement of a blockade on Iranian shipping through the Strait of Hormuz has further rattled markets.finance.yahoo

Broader Market Context

U.S. stock futures pointed modestly higher in early Thursday trading, with Dow Jones futures up slightly and Nasdaq 100 futures gaining ground. However, the mixed signals reflect a market caught between strong corporate earnings season and geopolitical risk.markets.businessinsider

According to TD Securities, investors are increasingly reluctant to maintain long positions in gold, with prices retreating toward the $4,100 level before breaking below it. Goldman Sachs ↘ 1.26% recently cut its 2026 gold forecast to $4,900 from $5,400, citing delayed Fed rate cuts. The Canadian dollar traded around 70.90 cents U.S. as commodity-linked currencies remained under pressure from the geopolitical uncertainty.tmgm+2