Brief Gold Market Overview

The decline in gold prices was primarily driven by the sharp rise in oil prices following renewed concerns over disruptions to global energy supplies. Brent crude rose from $95 to $101 per barrel, an increase of 6.32%, as attacks on Saudi oil tankers by Yemen's Iran-aligned Houthis raised fears that disruptions to oil supplies could spread beyond the Strait of Hormuz.

The rise in oil prices increased concerns that higher energy costs could fuel inflation, which strengthened expectations that central banks would keep interest rates higher for longer. This reduced expectations for monetary policy easing, pushed U.S. Treasury yields higher, and increased the opportunity cost of holding non-yielding gold, putting downward pressure on gold prices.

At the same time, the U.S. dollar strengthened by 0.3%, making dollar-denominated gold more expensive for international buyers and adding further pressure to prices.

The shift in interest-rate expectations was also reflected in market expectations for Federal Reserve policy. The probability of a Fed rate hike in September increased to approximately 83%, up from 68% on the previous day. This further reinforced expectations for a tighter monetary-policy environment and reduced the attractiveness of gold.

Overall, the combination of higher oil prices, rising inflation concerns, stronger expectations of higher-for-longer interest rates, rising Treasury yields, and a stronger U.S. dollar created a negative environment for gold. These factors ultimately outweighed the safe-haven demand associated with heightened geopolitical tensions, causing gold to fall by $70 during the trading session.