Gold Prices Plummet as Trump Rejects Iran's Hormuz Proposal, Oil Surges

Gold and silver prices plummeted on Monday after US President Trump rejected Iran's proposal to reopen the Strait of Hormuz within seven days. Gold fell by 3.2% to $4,150 an ounce, while silver dropped by 4.7% to $61.29 an ounce.

The rejection led to a surge in oil prices, with Brent crude rising over 3% to nearly $107 a barrel. This increase in oil prices adds to the inflation narrative and is being cited by hawkish policymakers as justification for further tightening.

The US Federal Reserve already raised its target range to 3.75%-4.00% on September 16, and money markets now price a 65.9% chance of another rate hike at the October 27-28 meeting.

Strategists at OCBC noted that resilient US economic data, elevated energy prices, and persistent inflation concerns are driving Treasury yields higher, which is weighing on gold and other rate-sensitive assets.