Gold steadies near $4,000 as dip-buying offsets Iran-fueled Fed hike fears

Gold steadied near $4,000 an ounce on Monday, paring a weekly decline that exceeded 2%, as dip-buying emerged after the precious metal broke below a key price level, even as escalating US-Iran hostilities kept alive bets that the Federal Reserve will raise interest rates.

Spot gold traded at $4,006.02 an ounce in Singapore, down 0.3%, after sliding more than 2% last week, according to Bloomberg data. The metal had been headed for its steepest weekly decline in six weeks, shedding 3.4% in international markets, as reported by the Economic Times.

The Iran conflict, now in its fifth month, is again driving up energy and commodity prices. Benchmark Brent crude jumped above $90 a barrel after an attack on a vital oil facility in Kuwait and the targeting of ships attempting to transit the Strait of Hormuz. Tehran said the ceasefire between the US and Iran has been effectively abandoned, raising the possibility of deepening disruptions to crucial energy flows through the narrow waterway.

Elevated energy prices have stoked inflation concerns, reinforcing expectations that the Fed could keep interest rates elevated for longer or eventually tighten. Higher borrowing costs are a headwind for non-yielding bullion.

“Gold is showing a relatively muted reaction to the spike in oil prices, which to me reflects some investor apathy around geopolitics” and instead increases focus on the Fed’s rates decision, Justin Lin, an analyst at Global X ETFs, told Bloomberg.

Swap traders have priced in at least one hike by the end of 2026, according to Bloomberg. The Financial Post reported that swaps see just a 12% likelihood of a rate increase at the Fed’s July meeting, but at least one hike by year-end. A growing chorus of Fed officials, including Cleveland Fed President Beth Hammack, has expressed concern over high inflation.

**Dip-buying emerges**

Some investors bought on dips after gold broke below $4,000, a key psychological level. “There was some dip buying on breaks of $4,000/oz,” Ryan McKay, senior commodity strategist at TD Securities, told the Financial Post. “It should be expected that there is some softening in the inflation numbers as energy prices tanked in June, but more recent escalations will be keeping a lid on things and keeping Fed hike odds alive.”

Bullion advanced as much as 1.2% on the day before settling back, but remained on track for a weekly decline of more than 2%, the Financial Post reported.

The decline in prices prompted investors to return to the yellow metal and drew consumers back to jewellery stores, according to industry executives cited by the Economic Times. “We have observed a nearly 25% increase in enquiries and store visits in July compared with last month following the recent decline in gold prices,” said Supriya Kataria, founder of Kumari Fine Jewellery.

Investors are taking advantage of lower gold prices while taking a more cautious approach to silver, the Economic Times reported. “Not only consumers, but investors as well are looking at gold because the risk-reward ratio at this point appears very favourable,” said Surendra Mehta, national secretary of the India Bullion & Jewellers Association.

Gold ETFs attracted net inflows of ₹3,443 crore in June, reversing a net outflow of ₹725.04 crore the previous month, according to data from the Association of Mutual Funds in India. Silver ETFs, by contrast, saw record inflows of ₹4,286 crore in June after a four-month streak of outflows, though investors have turned more circumspect on silver.

**Oil and inflation backdrop**

The Iran conflict is again driving up energy and commodity prices from fuel to raw materials used in manufacturing and food production, the Financial Post noted. “Precious metals have come under selling pressure as oil prices move back into the $80s/bbl range,” a commodity strategist told Mining.com.

US consumer sentiment rose in early July to a five-month high as lower gasoline prices boosted morale, the Financial Post reported. Consumers expect prices to rise at an annual rate of 4.2% over the next year, down from 4.6% in June.

Gold has hovered in a narrow range around $4,000 an ounce in recent weeks after losing 14% in the second quarter – its worst showing since 2013. It notched its worst monthly performance since the 2008 financial crisis in June.

Silver was 1% higher at $56.48 an ounce, while platinum and palladium declined, according to Bloomberg. The Bloomberg Dollar Spot Index was little changed.