Gold prices are showing a mixed trading pattern during the European session on Monday, dipping to a one-and-a-half-week low of $4,396.39 per ounce before stabilizing near the $4,440 mark. The dollar's modest retreat from two-week highs offers some breathing room for the bullion market, yet hawkish remarks from Fed Governor Warsh have pushed September rate hike odds to roughly 60% and December probabilities to 88%, capping gains for the yield-free asset. Escalating tensions between the US and Iran are fueling oil price advances and amplifying inflation worries, which in turn reinforces the case for tighter monetary policy.
Caught between tightening expectations and geopolitical uncertainty, gold remains under pressure with its recovery attempts below the $4,400 threshold lacking sustained momentum. While a softer dollar provides theoretical support for bullion, the shift in market pricing following Warsh's Jackson Hole speech has notably increased the opportunity cost of holding the metal. Meanwhile, the US-Iran standoff is lifting energy costs and stoking global inflation concerns, further cementing expectations that the Federal Reserve will maintain elevated borrowing costs or potentially hike again. US Treasury Secretary Bessent has signaled the possibility of new rounds of secondary sanctions against Iran on a weekly basis, keeping geopolitical risks firmly in the spotlight. With these factors converging, gold is grappling with the dual drag of rate hike expectations and energy-driven inflationary pressures.
Looking ahead, if upcoming US data continues to support the hawkish narrative or the conflict escalates further pushing oil prices higher, gold could face additional downside. Conversely, softer economic figures or a sharp spike in risk aversion might trigger intermittent rallies. In the near term, monetary policy expectations remain the primary driver steering price action.
Despite the broadly dollar-positive backdrop, weak Treasury yields are curbing sustained dollar buying interest, thereby limiting gold's decline. The US-Iran confrontation, while indirectly pressuring bullion through higher oil prices and firmer rate expectations, also introduces geopolitical uncertainty that could spur safe-haven demand, offering temporary stability. Institutions like TD Securities have highlighted that macro risk-hedging narratives and current positioning still provide some underlying support.
Market attention now pivots to the forthcoming US nonfarm payrolls report and other critical data releases this week, which will play a decisive role in shaping September policy expectations. A disappointing jobs number could weaken rate hike bets and boost gold, while a strong print would validate the hawkish stance and weigh on prices. As it stands, the fundamental backdrop continues to favor the dollar, suggesting any bounce in bullion may be viewed as a selling opportunity. Investors should keep a close watch on yield movements, geopolitical developments, and employment figures, as gold is likely to oscillate between rate pressures and haven demand in the short term.
In summary, gold maintains a soft tone below the $4,400 level, with Warsh's hawkish commentary lifting September hike odds to 60% and December to 88%, while the US-Iran conflict pushes oil prices up and reinforces rate expectations. Softening Treasury yields are constraining dollar upside, thereby limiting gold's losses. The precious metal may trade within a $4,350-$4,500 range in the near term, awaiting fresh direction from the nonfarm payrolls report. Overall, in an environment of rising rate hike expectations, any rebound in gold is likely to attract selling pressure.