Gold Steadies Amid Escalating US-Iran Tensions and Rising Oil Prices

Gold prices stabilized after two days of decline, rising 0.2% to $4,448.64 an ounce as US-Iran tensions escalated. The conflict between Washington and Tehran has increased concerns about energy market volatility, which could prompt the Federal Reserve to raise interest rates.

The latest developments involve American forces striking a target in the Strait of Hormuz, prompting Iranian attacks on the United Arab Emirates and Jordan. Oil prices have advanced following this escalation, with oil climbing after its largest daily rise in three weeks on Monday.

The potential for higher fuel costs to fuel inflation has raised concerns that the Federal Reserve may lift rates, which would be a headwind for non-yielding gold. However, gold's August surge of nearly 10% was largely driven by the US Treasury's mid-month decision to expand bond buybacks and curb borrowing costs.

The momentum behind this move faded after Fed Chairman Kevin Warsh delivered a hawkish address on Friday, pledging to fight inflation and prompting markets to price in a rate increase above 60% for the Sept. 15-16 meeting.