Gold prices fell more than 1% on Monday as investors treated the latest Gulf escalation less as a haven trigger and more as a threat to the rate outlook.
Spot bullion dropped 1.5% to $4,059.11 an ounce, while August futures lost 1.1% to $4,067.10.
The move came as oil jumped, the dollar strengthened and Treasury yields rose after Iran said it had closed the Strait of Hormuz, putting gold back under pressure after a fragile attempt to stabilise.
Bullion’s weakness shows how quickly the gold trade can turn when inflation fears move ahead of haven demand.
The metal had drawn support last week from softer US labour data and lower expectations for near-term tightening.
That support faded as crude rose about 4%, reviving concern that energy costs could keep price pressures elevated.
Gold normally benefits when geopolitical risk rises. But this episode is different because the market is focused on what higher oil might mean for interest rates.
When yields rise and the dollar firms, the opportunity cost of holding non-yielding bullion increases.
The Strait of Hormuz is the pressure point for investors. US and Iranian forces exchanged missile and drone strikes over the weekend, while Tehran said it had again shut the waterway.
Even a partial disruption would matter because the strait is one of the world’s most important energy routes.
Analysts at ABC Refinery see gold as vulnerable during the first phase of Gulf violence because oil-led inflation tends to lift the dollar and yields.
They also note a possible second-stage effect: if a prolonged disruption damages demand and slows growth, gold could later find support from recession or deflation fears.
That leaves bullion in a difficult middle ground.
The metal is not ignoring geopolitical stress, but the immediate price driver is the policy channel rather than pure safe-haven buying.
This week gives traders several tests.
Fed Chair Kevin Warsh is due to deliver his first semiannual testimony to Congress, while June CPI, PPI and retail-sales figures will shape the market’s view of whether inflation is cooling or being reignited by energy prices.
Fed officials Michelle Bowman and Christopher Waller are also scheduled to speak, adding to the focus on how policymakers judge the latest oil shock.
Futures markets now price about a 72% chance of a September rate increase, up from roughly 63% last week.
Other precious metals also weakened. Silver fell 2.9% to $58.14 an ounce, platinum lost 1.8% to $1,598.48 and palladium dropped 2.3% to $1,247.27.