Gold Trading Reminder: Gold Prices Hit Over One-Week Low! US-Iran Conflict Drives Up Oil Prices and Rate Hike Expectations, Bulls Face "Triple Blow"

FX Markets September 11th News—— Gold prices plunged nearly 2% on Thursday, with spot gold falling to around $4,316 and briefly hitting a more than one-week low of $4,313.58/oz intraday. The Houthi forces’ approach to the Bab-el-Mandeb Strait, combined with tensions in the Strait of Hormuz, pushed Brent crude close to $109, refreshing a three-and-a-half-month high and intensifying inflationary pressures; a hotter-than-expected US August PPI sent Federal Reserve September rate hike expectations up to 70%, with US Treasury yields and the US dollar rising in tandem, creating further pressure. In the short term, gold is clearly under pressure, but in the mid to long-term, geopolitical risks and central bank gold purchases still provide support.

On Thursday (September 10th), global financial markets were highly volatile, and gold prices fell sharply. Spot gold once dropped nearly 2%, hitting a low of $4,313.58/oz and closing near $4,316; gold futures settlement price dropped 1.2% to $4,407.30. Meanwhile, Brent crude oil surged past $105 and approached $110; US Treasury yields soared, and the US dollar index recouped earlier losses. On the surface, geopolitical conflicts should support safe-haven assets, but gold weakened against the trend due to the triple blow of soaring oil prices, renewed inflationary pressures, and heightened Fed rate hike expectations. In early Asian trading on Friday (September 11th), spot gold was hovering at low levels, currently trading near $4,315/oz, with the market’s attention continuing to focus on US CPI data and Middle East geopolitical developments.

Escalation of Geopolitical Conflict: Soaring Oil Prices as the Direct Catalyst

On Thursday, Yemen’s Houthi forces seized the important coastal port of Mokha on the Red Sea and advanced further south along the coast toward the Hanish Islands, drawing closer to the strategic Bab-el-Mandeb waterway. This development echoes the tense situation in the Strait of Hormuz. Military sources indicate that the Houthis’ operations are directly guided by Iran’s Islamic Revolutionary Guard Corps, with their influence now extended to the critical southern waterways in the Red Sea. Yemeni government forces and their allies are attempting to move south and control areas such as Dubab to contest command over the strait. The United Nations Special Envoy for Yemen has also warned that the conflict has entered a “new and more dangerous phase,” posing a serious threat to global freedom of navigation.

As the world’s largest oil exporter, Saudi Arabia has relied heavily on Red Sea shipping routes for oil exports since the effective blockade of the Strait of Hormuz. The Houthis have previously announced a maritime blockade of Saudi Arabia and intensified attacks. Further control over the Bab-el-Mandeb strait would give Iran and its allies a key strategic advantage in their confrontation with the US and severely constrain the capacity of alternative transportation routes. The market responded quickly: Brent crude rose more than 6% at one point on Thursday, breaking above $105 and briefly even reaching $109; US crude also broke above the $100 mark, touching $104.44 intraday and posting the largest single-day gain in nearly two months. Analysts noted that the threat is no longer limited to a single shipping choke point but may spill over into regional export routes, production facilities, and broader energy infrastructure.

Surging oil prices have directly pushed up global inflation expectations. The US Producer Price Index for August showed energy prices rising 4.2% month-on-month, ending two consecutive months of declines; diesel prices soared 24.1%, accounting for more than one-third of the total increase in commodity costs. Producer goods prices rose 1.1% overall. Such energy-driven inflationary pressures quickly fed through to a repricing of monetary policy in financial markets and became one of the core factors restraining gold.

Hotter-than-Expected Inflation Data: Rate Hike Expectations Rise Sharply

The US Department of Labor’s August PPI data became another key catalyst. Final demand PPI rose 0.4% month-on-month, in line with market expectations, but the year-on-year increase expanded to 5.4%, higher than forecast; July’s data was also revised up. Core goods prices, excluding food and energy, rose 0.4%. Notably, service sector details stood out: airline ticket prices, after falling in July, jumped 4.2%; road freight costs surged 2.0%; hospital outpatient and inpatient services rose by 0.4% and 0.5%, respectively. These items have a direct impact on the Fed’s preferred Personal Consumption Expenditures (PCE) price index.

Economists estimate that core PCE for August may rise by about 0.3% month-on-month. The CME FedWatch tool shows that market expectations for a 25 basis point rate hike by the Fed at the September 15-16 meeting quickly rose to around 70% from about 62% before the data release. While some institutions still believe the Fed may stand pat—citing factors such as impending PCE calculation method adjustments that may revise historical data downward, and moderate core inflation—overall market sentiment has shifted significantly more hawkish. The European Central Bank also raised rates by 25 basis points as expected on Thursday, further reinforcing global central banks’ resolve to combat energy inflation.

Meanwhile, the US Treasury market reacted violently. The 10-year yield rose more than 10 basis points at one point to around 4.92%-4.95%, the highest since the end of 2023; the 30-year yield approached its highest level since 2007; the two-year yield also rose to more than a two-year high. Rising US Treasury yields mean a higher opportunity cost of holding gold, directly weighing on gold prices. The US dollar index strengthened in tandem, regaining some of its earlier losses this week and hovering around 99, further increasing the cost of dollar-denominated gold for non-US buyers.

Market Sentiment and Capital Flows: Safe-Haven Logic Temporarily Yielding

Normally, escalation of US-Iran tensions, dual shipping risks in the Red Sea and Hormuz, and Trump’s remarks about possible war lasting until after the November midterm elections should reinforce gold’s safe-haven appeal. Trump even mentioned the possibility of attacking Iran’s “Tail Mountain” facility near Natanz, while the Iranian Revolutionary Guard threatened to step up retaliation. However, this time the market is more focused on sticky inflation and the risk of tightening monetary policy. Persistently high oil prices mean inflation could be more sustained, leading the bond market to reprice accordingly and weighing on gold.

Some analysts point out that increased crude oil purchases by Asian countries have recently lifted the spot market, and if this trend continues, the impact of supply disruptions might be amplified; on the other hand, if it reverses, it may limit further oil price increases. Although US crude inventory data showed a slight draw, it was less than expected and provided limited support for oil prices. Overall, short-term capital is more likely, given higher rate expectations, to reduce allocations to non-interest-bearing assets like gold and turn instead to higher-yielding US Treasuries or dollar assets.

Outlook: Pressured in the Short Run, Support Still Intact Long Term

Given the current situation, gold faces obvious short-term pressure. If Friday’s August CPI data is also hotter than expected, rate hike expectations could strengthen further and gold may test lower support levels. If oil prices remain elevated due to ongoing geopolitical conflicts, persistent inflation will continue to limit gold’s rebound potential. Nonetheless, from a medium- to long-term perspective, gold still enjoys multiple supports: the US-Iran conflict is far from over, with shipping risks and energy supply uncertainty likely to roil markets from time to time; global central banks continue to accumulate gold reserves; and, if inflation eventually falls back with demand softening or supply relief, expectations for a Fed policy shift will resurface.

The current adjustment of gold prices essentially reflects the market’s repricing between “geopolitical safe haven” and “monetary tightening.” The Houthis’ approach to the Bab-el-Mandeb, ongoing Hormuz tensions, and the rebound in US inflation data have together created a more complex pricing environment. Investors should closely watch actual shipping disruptions, oil price trends, and the Fed’s ultimate decision. In an environment of elevated uncertainty, the long-term allocation value of gold is intact, but short-term volatility will rise significantly. Watch for resistance near the 100-day moving average of $4,339 and the $4,400 level above, and support at the early September low of $4,282 and near the 50-day moving average of $4,268 below.


(Spot Gold Daily Chart, Source: EasyMarkets)

Beijing Time 07:45, spot gold now quoted at $4,317.18/oz.