Gold Falls to Two-Week Low as Rate-Hike Bets Build and Oil Surges on Hormuz Strike

The main pressure came from expectations of higher U.S. interest rates. Markets increased the probability of a September rate hike to approximately 64%, compared with 36% before Warsh's Jackson Hole speech. Higher rates increase the opportunity cost of holding gold, which generates no yield.

Rising energy prices added another layer of pressure. Crude oil prices climbed more than 2% after the United States struck an Iranian island in the Strait of Hormuz and Iran said it had responded, escalating a conflict now in its sixth month. Higher oil prices can increase inflation expectations, potentially reducing the likelihood of monetary easing and reinforcing expectations for higher interest rates.

The U.S. dollar remained near a two-week high, while U.S. yields continued to strengthen. Although a slight pullback in the dollar during the session limited gold's losses, the broader strength of the currency continued to weigh on dollar-denominated bullion.

Daniel Pavilonis, senior market strategist at StoneX, pointed to the combination of rising interest-rate and inflation expectations — driven in part by energy prices and falling oil inventories — alongside strengthening Treasury yields and a firmer dollar, as leaving gold in what he described as a difficult position.

Despite the sharp correction, gold remained on track for its strongest monthly performance since January, with prices still up approximately 9.7% in August. This highlights the contrast between the short-term correction and the metal's strong monthly performance. Silver, platinum, and palladium also posted strong monthly gains despite Monday's pullback, with silver up roughly 15% for the month.