Gold prices fell at the start of Asian trading on Monday, affected by escalating military tensions in the Gulf region. In addition, rising oil prices contributed to the decline.
This reinforced expectations that the United States will maintain its tight monetary policy to counter inflationary pressures.
Gold Prices Record Sharp Decline
The spot price of gold fell by 1.53% to $4,057.02 per ounce.
Meanwhile, U.S. gold futures for August delivery declined by 1.2% to $4,064.50 per ounce.
The drop came after the military standoff between the United States and Iran escalated over the weekend. The region witnessed mutual attacks involving missiles and drones.
Strait of Hormuz Closure Pushes Oil Higher
Tehran once again announced the closure of the Strait of Hormuz, one of the world’s most important maritime corridors for oil transportation.
As a result, crude oil prices jumped sharply, while the U.S. dollar strengthened. At the same time, several Asian stock markets recorded losses.
Investors Await Key U.S. Economic Data
Investors are closely monitoring a series of important economic events scheduled for this week.
Most notably, Federal Reserve Chair Kevin Warsh’s semiannual testimony before Congress is expected to attract significant attention. In addition, markets will closely follow the release of the Consumer Price Index.
The Producer Price Index and June retail sales figures are also on the agenda. These reports could help determine the direction of U.S. monetary policy in the coming months.
Inflation Pressures Continue to Rise
In its latest report, the Federal Reserve noted that inflation in the United States increased during the spring. According to the report, the rise was partly driven by the impact of tariffs.
Inflationary pressures were further compounded by higher energy costs resulting from the war. Furthermore, investments related to artificial intelligence recorded a significant surge.
Gold Demand Remains Stable in China
In Asian markets, gold was traded at significant discounts in India due to continued price volatility.
Meanwhile, demand remained stable in China, supported by the People’s Bank of China’s continued increase in its gold reserves.
The latest increase represented the central bank’s largest monthly gold purchase in more than two and a half years.
Other Precious Metals Also Decline
Other precious metals recorded widespread declines amid continued caution across global markets.
Silver fell by 2.88%, while platinum declined by 1.97%. Palladium also dropped by 2.25%.
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