Gold Falls to One-Week Low as Houthi Attack Lifts Oil and October Hike Odds Hit 69%

Oil prices rose by around 2% following a Houthi missile attack on Saudi Arabia, reviving concerns about potential supply disruptions. Higher energy prices can push inflation upward as businesses pass increased production and transportation costs on to consumers. This raises the risk that inflation will remain elevated, strengthening expectations that the Federal Reserve will maintain or further tighten monetary policy.

The Fed raised interest rates for the first time in three years the previous week and signalled that additional increases could follow. Several officials have since reinforced this message, with Governor Michael Barr highlighting the likelihood of further rate hikes. Markets were pricing in a 69% probability of another increase in October.

The U.S. dollar also reached a two-month high, adding further pressure to bullion. Since gold is priced in dollars, a stronger dollar makes it more expensive for buyers using other currencies, potentially weakening international demand. At the same time, 10-year U.S. Treasury yields remained near a two-decade high, increasing the returns available from interest-bearing assets and making gold less attractive by comparison.

From a technical perspective, the $4,235 area is an important support level to watch. According to Ole Hansen of Saxo Bank, a break below this level could expose gold to a deeper correction, with the June–July region around $4,000 becoming a potential area of focus.