Rizky Amelia
Gold prices retreated sharply on Monday, sliding to their weakest level in more than seven weeks as a combination of rising oil prices, a strengthening US dollar and elevated Treasury yields combined to sap demand for the precious metal. Spot gold dropped 3.3 percent to trade at $4,146.51 an ounce, marking its lowest reading since August 5. US gold futures followed the same trajectory, also declining 3.3 percent to $4,178.40, underscoring the breadth of the sell-off across both physical and derivative markets.
The decline comes against the backdrop of an ongoing war between the United States and Iran, a conflict that has disrupted energy markets and injected fresh uncertainty into the global economic outlook. Oil prices climbed roughly 3 percent after US President Donald Trump rejected an Iranian proposal aimed at resolving the conflict and reopening the Strait of Hormuz, a critical chokepoint for global crude shipments. The spike in energy costs has reignited inflation concerns in the United States and beyond, complicating the calculus for investors who had looked to gold as a protective asset.
Rising fuel prices feed directly into headline inflation, and that dynamic is now shaping expectations about monetary policy. The Federal Reserve raised its benchmark interest rate by a quarter percentage point earlier this month and signaled that at least one additional hike is likely in the months ahead. That stance has been reinforced by several policymakers who continue to warn that inflation risks remain elevated. Among them is Cleveland Fed President Beth Hammack, who recently reiterated her view that rates may need to move higher to bring price pressures under control.
Higher interest rates pose a particular challenge for gold because the metal does not generate interest or dividends. When Treasury yields rise, yield-bearing assets such as government bonds become more attractive relative to bullion, drawing capital away from the gold market. This relationship helps explain why gold, despite its traditional reputation as an inflation hedge, has struggled even as inflation concerns intensify. The opportunity cost of holding a non-yielding asset grows larger as rates climb, and investors have responded by rotating toward instruments that offer a return.
Sherif Othman, chief executive of Maryland-based Poise Investment Advisors, told Al Jazeera that the immediate consequences for ordinary households may be limited. However, he noted that investors who have allocated capital to gold will feel the pinch, particularly in an environment where inflation is already running high. Othman also emphasized the mechanical link between Treasury yields and gold valuations, explaining that because gold offers no interest income, rising yields naturally push investors away from the metal and depress its price.
Currency markets have compounded the pressure. The US dollar held steady near a two-month high, making dollar-denominated commodities such as gold more expensive for buyers using other currencies. A stronger greenback typically acts as a headwind for metals priced in dollars, since it reduces demand from overseas purchasers. The combination of a firm dollar, climbing oil prices and elevated bond yields has created what Jim Wyckoff, a market analyst at American Gold Exchange, described as a perfect storm pushing metals prices sharply lower.
The pain was not confined to gold. Spot silver tumbled 4.7 percent to $61.27 an ounce, a significant single-day loss that illustrates how broadly the selling pressure spread across precious metals. Platinum declined 2.9 percent to $1,726.30, while palladium shed 4.4 percent to $1,211.45. The synchronized declines suggest that investors were not making distinctions between individual metals so much as retreating from the asset class as a whole in response to macro-level forces.
Gold's slide to a seven-week low represents a notable reversal for an asset that many investors turn to during periods of geopolitical turmoil. Historically, gold has functioned as a safe-haven store of value during conflicts and crises, but the current environment has flipped that script. The war between the US and Iran has primarily transmitted its market impact through energy prices, which in turn have fueled inflation expectations and reinforced the case for tighter monetary policy. In this instance, the conflict has indirectly hurt gold rather than helped it.
The trajectory of the conflict remains a key variable. Trump's rejection of the Iranian offer leaves the Strait of Hormuz in a state of uncertainty, and any further escalation could push oil prices even higher. Sustained increases in energy costs would likely keep inflation elevated, which in turn could prompt the Fed to extend its rate-hiking cycle. Each additional rate increase would further erode the appeal of holding gold, creating a feedback loop that has already dragged prices down from recent highs.
Market participants are now focused on the Fed's next moves and the path of the dollar. If Treasury yields continue to climb and the dollar holds near its recent peak, gold could face additional downside pressure. Conversely, any sign of de-escalation in the US-Iran conflict, or a softening of rhetoric from Fed officials, could shift the calculus and provide relief to metal prices. For now, the momentum appears firmly bearish, with the metal struggling to find a floor amid the prevailing macroeconomic currents.
The broader implications extend beyond trading desks. A prolonged period of elevated inflation and rising interest rates affects borrowing costs for consumers and businesses alike, while a weaker gold price can influence everything from jewelry demand to the strategies of institutional portfolio managers. Investors who built positions around gold's hedging properties are now reassessing those assumptions, particularly those who entered the market expecting the metal to shield them from the very inflation pressures that are currently working against it.
Monday's session served as a reminder that gold's behavior is rarely straightforward. Its dual identity as both an inflation hedge and a non-yielding asset means its price can move in unexpected directions depending on which force dominates at a given moment. Right now, the yield factor is clearly in control, and until the interest rate outlook changes or the geopolitical landscape shifts in a way that alters energy markets, the metal may continue to struggle against the weight of rising yields and a resilient dollar.
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