Gold Slides Over 1% as Oil Jumps 4% on Hormuz Fears; Fed Inflation Warning Weighs on Bullion

Gold Declines as Oil Surge and Fed Inflation Outlook Revive Rate-Hike Bets

Gold prices dropped more than 1% in early Asian trading on Monday, pressured by a 4% surge in oil prices and a firmer US dollar. The move reflects markets recalibrating expectations for elevated interest rates following the Federal Reserve’s latest inflation assessment and escalating geopolitical tensions in the Gulf region.

Oil prices extended gains from Monday’s 3% rally, driven by fears over potential disruptions to shipping through the Strait of Hormuz after weekend missile and drone strikes between US and Iranian forces. Tehran reiterated claims of closing the strait, though shipping data remains unclear on actual traffic impacts.

The Fed’s Friday monetary policy report to Congress cited tariffs, war-related energy costs, and AI-driven demand as key drivers of renewed inflationary pressures. The central bank’s explicit linkage of Gulf conflict to energy price risks has reinforced expectations for a cautious approach to rate cuts, bolstering the dollar and pressuring gold.

Implications for Forex Traders

The dollar index (DXY) climbed alongside oil, reflecting a shift toward pricing in a firmer monetary policy outlook. Rising real yields and rate-hike expectations are overshadowing traditional safe-haven demand for gold, despite heightened geopolitical risk. Traders are likely to monitor upcoming US inflation data and Fed communications for further cues on policy trajectory.

Technical indicators suggest gold may face additional downside pressure if the DXY sustains its rally above key resistance levels. Meanwhile, oil’s surge could fuel further volatility in energy-linked currencies and commodities.

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