Gold slips as U.S.-Iran conflict fuels rate hike fears

Gold prices headed for a decline in early Asian trading on Monday as the escalating U.S.-Iran conflict created a paradox for precious metals: geopolitical risk that would typically support bullion was instead being overshadowed by a stronger dollar and expectations of higher interest rates.

A Week of Losses Amid Escalation

Gold ended the prior week on the back foot, with spot prices declining 0.4% to $4,103.23 per ounce on Friday, while U.S. gold futures for August delivery dropped 0.7% to $4,113.70 per ounce. Silver fell 0.7% to $59.56 per ounce. Over the week, gold lost roughly 1.5% from the prior Friday's fix of around $4,100 per ounce, while silver gave back three-quarters of the previous week's 6.6% rebound, according to BullionVault.bullionvault+1

The losses came despite a dramatic escalation in hostilities between Washington and Tehran. Over the weekend, the U.S. launched fresh strikes on Iran after Iranian forces attacked a ship passing through the Strait of Hormuz. In response, Iran's Islamic Revolutionary Guard Corps declared the waterway closed and launched attacks on U.S. bases and allies across the region, including in Jordan, the UAE, Qatar, Kuwait, and Bahrain.reuters+2

The Dollar-Rate Paradox

The counterintuitive decline in gold amid rising geopolitical tensions reflects the dominance of monetary policy expectations over safe-haven demand. U.S. President Donald Trump declared the interim peace deal with Iran "over" earlier in the week, sending oil prices sharply higher and reviving inflation fears. Higher oil prices feed expectations that the Federal Reserve could raise rates further, boosting the dollar and Treasury yields — both of which weigh on non-yielding bullion.cnbc+1

Reuters Thomson Reuters Corporation ↗ 1.68% reported that gold fell to its lowest level in nearly a week as the strikes boosted oil and the dollar, "raising concerns that inflation could keep interest rates higher for longer". The hawkish tone from recent Fed minutes, which included discussion of potential additional rate hikes, has further pressured gold in the medium term.reuters+1

Volatility Expected Ahead

Analysts expect precious metals to remain volatile as markets weigh the conflict alongside upcoming economic data. "Gold will remain under pressure in the coming sessions, with the prospects of new 2026 lows rising against a backdrop of heightened geopolitical tensions and Fed rate hike bets," said Nikos Tzabouras, senior market analyst at Tradu.com. Specialist consultancy Metals Focus offered a more measured view, saying it expects "gold to enter a period of consolidation over the summer" but that the broader rally should eventually resume.cnbc+1

Trading Economics data showed gold falling to $4,081.43 on July 13, suggesting the bearish momentum carried into the new week as Asian markets opened amid the intensifying Gulf crisis.tradingeconomics