Gold markets faced renewed pressure on Monday as Brent crude’s surge above $90 per barrel reignited inflation fears and bolstered expectations that the Federal Reserve could raise interest rates again this year. Spot bullion slipped 0.1% to around $4,015 an ounce, while August futures hovered near $4,020, highlighting an unusual dynamic in which intensifying US-Iran hostilities are failing to lift the yellow metal despite typical safe-haven demand.
The underlying issue is an oil shock that threatens to undermine gold’s traditional role as an inflation hedge. Brent gained roughly 3% to $90.79 a barrel and West Texas Intermediate neared $85 after a ninth straight night of US strikes on Iran and further attacks across the Gulf. Shipping through the Strait of Hormuz has slowed dramatically, with only four vessels recorded on Sunday. OANDA strategist Kelvin Wong warned that the conflict raises the risk of a broader offensive and a stagflationary shock, in which higher bond yields and tighter monetary policy could outweigh gold’s appeal.
The hawkish tilt in Fed rhetoric has only strengthened. Cleveland Fed President Beth Hammack has joined officials arguing that borrowing costs may need to rise if inflation stays above the 2% target. Interest-rate markets now price roughly four-in-five odds of a hike by December, up from about 73% a week ago. Higher rates typically weigh on gold because investors can earn more from yield-bearing assets, and that same logic applies to risk assets like cryptocurrencies.
Gold’s price remains critically dependent on the $4,000 psychological floor. A sustained break below the recent low of around $3,985 could open a path to $3,886, a level Wong identifies as key for the longer-term trend, with further downside toward $3,500 possible. While technical analysts point to a rebound toward $4,200 based on support near $3,950, the macro backdrop of rising energy costs and a more determined Fed is creating a precarious environment for any non-yielding asset.
For Bitcoin and the broader crypto market, the implications are clear. The digital gold narrative means Bitcoin often trades in sympathy with gold during periods of monetary policy uncertainty. Should gold break down, it could trigger a broader rotation out of alternative stores of value, dragging BTC and other major coins lower. Conversely, if gold holds support and the Fed eventually pivots, a relief rally could benefit crypto. For now, traders are watching gold’s next move as a potential leading indicator for risk appetite.
