Gold, Silver Tumble as Oil Prices Rebound and Yields Rise

The precious metals market experienced a sharp decline in early US trading on Monday, with spot gold and silver prices plummeting due to a rebound in oil prices. The inflation narrative tightened, reinforcing expectations for another Federal Reserve rate increase. Spot gold was trading near $4,165.00 an ounce, down 2.78% on the session, while spot silver was trading near $61.290, down 4.49%. Market positioning has shifted back toward higher-for-longer US rates after stronger activity data and firm inflation expectations pushed the policy-sensitive parts of the Treasury curve higher.

Traders now see a 68% to 70% chance of another Fed rate increase in October, while the dollar index traded near the 101 area and the 10-year Treasury yield was near the 5.2% area. The Strait of Hormuz situation is back at the center of the cross-asset trade, with President Donald Trump rejecting Iran's proposal to reopen the strait and end the fighting.

The impact on gold remains split: geopolitical risk supports defensive demand, but higher oil is lifting yields and the dollar, raising the opportunity cost of holding non-yielding bullion. Global risk appetite weakened before the US open, with S&P 500 futures down 0.5% and Nasdaq futures falling 1.0%. The 2-year Treasury yield was up about 5 basis points at 4.914%, while the 30-year yield held near 5.52%.