Gold Slips on Fresh US-Iran Clashes

Gold fell to around $4,050 an ounce on Monday, snapping a two-day rebound as renewed exchanges of attacks between the US and Iran over the Strait of Hormuz lifted oil prices and rekindled inflation concerns. The conflict escalated since Thursday, with Iran targeting a container ship, a vessel carrying Qatari oil, and military bases in Kuwait and Bahrain, prompting multiple US retaliatory strikes. However, both sides later agreed to suspend further attacks ahead of peace talks set to resume this week in Doha, Qatar. Meanwhile, data last week showed US PCE inflation broadly matched expectations, leading investors to slightly pare back bets on Federal Reserve rate hikes this year. Markets are now awaiting the latest US monthly jobs report and the ISM Manufacturing PMI for further clues on the outlook for monetary policy.

Gold traded around $4,040 per ounce on Friday, edging up for a second consecutive session after the latest US PCE inflation report came in broadly in line with expectations, prompting investors to modestly scale back expectations for Federal Reserve rate hikes this year. Despite the rebound, gold remains down about 3% for the week, marking its fourth consecutive weekly decline, as the hawkish tone struck by the Fed continued to support the US dollar. Meanwhile, new Fed Chair Warsh reaffirmed the central bank's commitment to bringing inflation under control, easing concerns that he might yield to pressure from US President Trump to cut interest rates prematurely. The Fed also raised its 2026 PCE inflation projections. The headline PCE inflation rate accelerated to 4.1% in May. Markets are currently pricing in three Federal Reserve rate hikes this year, with the probability of the first increase coming in September standing at around 62%.

Gold fell to around $4,000 an ounce on Friday and was on track to lose about 5% for the week as hawkish signals from the US Federal Reserve outweighed support from the impact of US-Iran peace efforts. On Thursday, bullion rebounded modestly after the latest US PCE inflation data came in broadly in line with expectations, easing fears of imminent Fed rate hikes and pushing the dollar and Treasury yields lower. Even so, markets are pricing in an 80% chance of a Fed rate hike in December following last week's hawkish pause, while the probability of a September increase stands at around 63%. Meanwhile, oil prices continued to retreat and have returned to pre-conflict levels as progress in US-Iran peace negotiations eased concerns over Middle East supply disruptions and further reduced inflation worries.