Gold Falls Below $4200 as Yields Rise, Oil Prices Surge on Hormuz Tensions

Gold prices plummeted to under $4200 as yields rose and Fed rate-hike bets firmed, breaking key support. The move extends a downtrend from mid-September highs above $4430. Traders attributed the drop to higher yields and hawkish bets on the Federal Reserve.

The US dollar strengthened against major currencies in Asia-Pacific markets, with the NZD outperforming. Nasdaq futures slipped before Micron earnings, erasing early gains in the Nikkei 225. Major FX pairs traded in a range, with the USD/CNY reference rate set by the PBOC at 6.7399.

Oil prices rose at the open after President Trump rejected Iran's seven-day proposal to reopen the Strait of Hormuz, although he said he expects talks to resume this week. A cruise missile was fired at a vessel in the Strait, adding to risk going into the open. The US president also expressed interest in banning diesel exports to combat high prices.

Goldman Sachs analysts said that such a ban would initially cut US diesel prices by about 4% and lift European wholesale prices by about 2%. A former BOJ official stated that the central bank could raise rates again in October, following July minutes showing dissent in favor of a hike. China's industrial profits rose 4.2% in August, the weakest pace this year.