Gold Shrugs Off Escalating Iran Conflict Amid Rising Oil Prices and Interest Rate Hopes
The Iran conflict has escalated significantly, but gold and silver have barely moved in response. The price of gold is near $4,335 an ounce, a small drop from Tuesday's close of $4,328, while silver sits at around $64.34, only slightly above its previous close of $64.08.
The market has become numb to this type of news, with investors seemingly ignoring the increasing tensions between the US and Iran. The price action is in stark contrast to what would be expected according to traditional economic theory.
Instead, the real drivers of gold's price are elsewhere. Oil prices have risen significantly, trading above $90 a barrel for WTI crude and over $95 for Brent. The 10-year Treasury yield has also climbed to its highest level since January 2025, nearing 4.79-4.80%.
The Federal Reserve is widely expected to raise interest rates in the coming weeks, with the CME FedWatch Tool showing a 65-70% chance of a hike in September. This shift in monetary policy has made holding gold and silver less attractive, as they offer no yield and are vulnerable to rising interest rates.
The Iran conflict is not the primary driver of gold's price, but rather a symptom of a larger issue: the ongoing struggle between inflation and rate hikes. The sound money thesis argues that geopolitical energy shocks will amplify baseline inflation, making it difficult for central banks to control without risking a recession.