Gold steadies after two-day drop as Iran strikes revive inflation risks

Gold prices steadied on Monday after falling more than 3.5% over the previous two sessions, as renewed U.S.-Iran strikes raised the risk of higher energy costs and added pressure on the Federal Reserve to keep interest rates elevated.

At 21:22 ET (01:22 GMT), XAU/USD fell 0.1% to $4,444.36 an ounce, while Gold Futures gained 0.3% to $4,493.25. XAG/USD rose 0.2% to $66.67 an ounce, while XPT/USD gained 0.4% to $1,802.60. The US Dollar Index was little changed at 99.46.
Fresh U.S.-Iran strikes revive inflation concerns
Gold’s retreat has come as the U.S. and Iran exchanged strikes for the first time in a month, adding a new layer of uncertainty to energy markets.

U.S. forces struck Iranian rocket launchers on an island in the Strait of Hormuz on Sunday, saying the weapons were being prepared to deploy mines in the strategic waterway. Iran subsequently attacked targets in the United Arab Emirates and Jordan.

The latest strikes underline the continuing standoff between Washington and Tehran after more than six months of conflict. The Strait of Hormuz remains a key point of tension, with the conflict already disrupting global energy flows.

Oil prices moved higher after posting their biggest gain in three weeks on Monday. Higher energy prices matter for gold because they can feed inflation, giving the Federal Reserve another reason to keep rates high or raise them further.

That is a headwind for bullion because gold does not generate interest. When rates rise, investors can earn more from interest-bearing assets such as government bonds, increasing the opportunity cost of holding gold.

Markets now price more than a 60% probability of a 25 basis point Fed rate increase at the September 15-16 meeting, according to according to CME FedWatch.

Tony Sycamore, senior market analyst at IG, said the recent $300 decline from last week’s high near $4,697 to Monday’s low around $4,397 reflected the combination of Warsh’s hawkish Jackson Hole speech and renewed tensions around Hormuz.

Sycamore said that mix has pushed bond yields higher and left gold vulnerable ahead of the Fed’s next meeting.

Treasury moves keep August rally, debasement trade intact
Despite the recent pullback, gold clocked nearly 10% gains in August, its strongest monthly gain since January.

The metal’s August rally accelerated after the U.S. Treasury unexpectedly announced plans to increase purchases of longer-dated government debt.

The intervention lowered borrowing costs and pushed the dollar lower, while also reviving concerns around the scale of U.S. sovereign debt and the potential for currency devaluation.

Those concerns have brought the debasement trade back into focus, a theme that helped drive gold’s roughly 65% rally in 2025 as investors sought protection from rising government deficits and currency weakness.

Investor demand has since broadened, with gold-backed ETFs posting their largest daily inflow since September 2025 and extending their run of net inflows to five straight weeks.

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However, the hawkish shift from the Fed has now interrupted that momentum. Gold also slipped back below its 200-day moving average, which stood near $4,526, causing some short-term technical damage.