Gold Slides as Trump Rejects Iran's Proposal, Hike Odds Rise
Gold futures dropped sharply on Monday, trading at $4,170.17 after President Trump rejected Iran's proposal to reopen the Strait of Hormuz within seven days. The move erased cautious optimism that had briefly steadied the metal heading into the new week.
The surge in oil prices following Trump's dismissal of Tehran's proposal rekindled inflation concerns, putting pressure on gold as a stronger dollar, rising bond yields, and increasing expectations for another federal funds rate hike all weighed on the metal.
Money markets now price roughly a 66% chance of another Fed rate hike at the October meeting, up sharply from just 9.4% a month ago following the Fed's first rate increase since 2023 on September 16, which brought the target range to 3.75%-4.00%.
Cleveland Fed President Beth Hammack noted that these factors, together with concerns over government debt, are contributing to higher long-term Treasury yields. Gold and silver prices slipped sharply as rising global bond yields cooled investor appetite for non-interest-bearing assets.