Gold Drops Below $4,000 as Dollar and Oil Both Rise on Ninth Night of Iran Strikes

Since the US launched its ninth straight night of airstrikes on Iran over the weekend, gold has kept sliding instead of catching the safe-haven bid you'd expect from a widening Middle East war.

Spot gold fell 0.9% Monday to $3,982.77 an ounce, according to Economies.com, after opening at $4,017.45 and touching an intraday high of $4,030.85. That's down from a brief rebound Friday, when gold settled more than 1% higher after touching a two-week low of $3,959.72. Gold lost 2.5% last week, its second straight weekly decline.

Gold is usually the thing people buy when the world looks like it's on fire. Not this time. The dollar index rose about 0.2% Monday, extending gains for a third straight session, according to Economies.com. Investors are running to the dollar itself as the safe haven, which makes dollar-priced gold more expensive for everyone else holding euros, yen or rupees, and that's dragging demand down.

At the same time, oil is doing the opposite of what would normally help gold. Brent crude climbed above $90 a barrel Monday, up roughly 3% and extending a second straight day of gains to hit a six-week high, per Economies.com. Iran has threatened to halt all traffic through the Strait of Hormuz if US military operations continue, and shipping traffic through the waterway has already declined sharply as security risks and reciprocal attacks mount. Higher oil normally feeds inflation fears, and inflation fears normally help gold as a hedge. Instead, traders are reading it as a signal the Fed has to hike, and that's crushing gold's appeal as a non-yielding asset.

The rate-hike math working against gold

Traders are now pricing in a 61.4% chance the Federal Reserve hikes rates in September, according to the CME FedWatch Tool, cited by FXStreet. That's a sharp reversal from where markets sat just weeks ago, when rate cuts were the base case.

Crypto Briefing reported gold trading around $4,017 an ounce as of July 19, framing the move as tied to inflation expectations climbing above 3%, driven partly by a reported 21.2% jump in gasoline prices. Crypto Briefing flagged the Fed's upcoming meeting on July 29 as the next major catalyst, noting that any decision to raise rates there could further impact gold prices going forward.