Gold Price Plummets as US-Iran Conflict Escalates, Fed Hawks Warn of Higher Interest Rates
The gold price fell sharply after the US-Iran conflict escalated on August 31. Spot gold dropped from around $4,470 to a session low of approximately $4,396.60 before recovering towards the $4,430 area.
The market reaction was unusual, as oil prices surged while gold fell. Brent crude climbed above $90 a barrel, and WTI moved above $85, as traders reassessed the risk of further disruption to energy supplies through the Strait of Hormuz.
The conflict has created a paradox for gold traders: geopolitical escalation is not necessarily bullish for gold when it simultaneously pushes oil prices and inflation expectations higher. The Federal Reserve's hawkish tone on inflation, delivered by Chair Kevin Warsh at the Jackson Hole conference, also contributed to the gold price decline.