Gold Prices Dip as Strait of Hormuz Attack Drives Oil Higher

Gold and silver prices declined on Tuesday as concerns over inflation and geopolitical tensions drove oil prices higher. Spot gold was trading at $4,390.40 an ounce, down 0.58%, while spot silver was at $64.89, down 1.17%. The Strait of Hormuz remains a key factor in the market, with a recent attack on a ship transiting the strait causing damage and raising concerns over supply.

Nohshad Shah, head of EMEA fixed-income sales at Citadel Securities, stated that inflation has 'little to no breathing room' in a supply-shock environment. Long-end Treasury yields are rising as traders reprice oil-driven inflation and fiscal-risk premium. The 10-year Treasury yield is trading near 4.74%, while the 30-year yield has reached its highest level since 2007.

The market-implied probability of a September Federal Reserve rate hike remains low, around 30% to 35%. However, the recent attack on the Strait of Hormuz and rising oil prices keep energy inflation risk in the market. For gold, the setup remains two-sided: shipping-risk headlines support defensive demand, while higher crude and rising long yields limit the rate-relief bid.