Hormuz Shock Lifts Rate Hike Odds Instead of Gold, Pressuring Bullion Toward US$4,000

• Spot gold fell 1.5% to $4,060.49 because Strait of Hormuz closure fears pushed Brent crude up 4.1% to $79.11, lifting the dollar and offsetting gold's traditional safe-haven demand.
• Gold traded just $60 above the World Gold Council's US$4,000/oz selling threshold, where its Gold Valuation Framework indicates sustained trading below that level could trigger additional selling.
• Strait of Hormuz tensions lifted oil prices, prompting CME FedWatch traders to raise the probability of a September Fed rate hike to 72% from 63% as inflation expectations increased.
• The World Gold Council's baseline scenario targets gold at US$3,895 to US$4,305 through year-end, assuming at least one Fed rate hike by October and US inflation peaks near 3.9% in Q2.
• COMEX gold speculative net long positions fell by 1,964 contracts to 114,854 in the week to July 7, showing speculative positioning had already weakened before Monday's price drop.

Hormuz Oil Shock Lifts Fed Rate Hike Odds, Pressuring Gold

Gold fell 1.5% to $4,060.49 per ounce as Strait of Hormuz closure fears pushed Brent crude up 4.1% to $79.11 per barrel, lifting inflation expectations and strengthening the dollar instead of gold. Iran declared the Strait of Hormuz closed after targeting US facilities across Gulf states. The stronger dollar lifted the US dollar index 0.1% to 101.13 and pushed August gold futures down 1% to $4,069.50. 

Nicholas Frappell, global head of institutional markets at ABC Refinery, said, "Any breakout of violence in the Gulf is accompanied by pressure on gold." CME FedWatch traders raised the probability of a September Fed rate hike to 72% from 63%, while the probability of two or more hikes by December increased to 50.9% from 47.6%. Tony Sycamore, market analyst at IG, said, "This reinflames concerns that if energy prices rise from here, we could start to see rate hikes pulled forward."

Fed Inflation Outlook Keeps Gold Above US$4,000 as CPI Tests the Price Range

The World Gold Council values gold around US$4,100/oz if the Fed delivers at least one rate hike by October, US inflation peaks near 3.9% in Q2, and other major central banks continue tightening. Those assumptions support a year-end gold range of US$3,895 to US$4,305. Gold traded at $4,060.49, placing it in the lower half of that range and $165 above its floor. 

The World Gold Council also said sustained trading below US$4,000/oz could trigger further selling. Fed Chair Kevin Warsh's congressional testimony, June CPI, PPI, and retail sales data, and remarks from Fed Vice Chair Michelle Bowman and Governor Christopher Waller could change inflation expectations and shift the outlook for gold.

Fed Rate Expectations Define Gold's US$4,000 Floor and US$4,500 Upside

Juan Carlos Artigas, Regional CEO, Americas and Global Head of Research at the World Gold Council, said gold remains a global asset because its price reflects macroeconomic and geopolitical developments worldwide. He added that gold has repeatedly rebounded near US$4,000/oz as long-term buyers returned to the market. The base case assumes US inflation peaks near 3.9% in Q2, September Fed rate hike odds remain near 72%, and gold trades between US$3,895 and US$4,305. 

Gold requires weaker rate expectations and "a strong signal of global deceleration" to rise above US$4,500/oz, while stronger dollar performance, additional Fed rate hikes, and sustained trading below US$4,000/oz could trigger further selling. Fed Chair Kevin Warsh's testimony and the US CPI release this week are the key catalysts.

COMEX Selling Slows as Higher-Cost Gold Producers Face Margin Pressure

World Gold Council data show gold fell 26% from a record US$5,405/oz to US$4,002/oz as the US-Iran conflict, speculative positioning, and profit-taking drove first-half price performance. Average gold volatility reached 30% during the first half of 2026, yet gold remained one of the strongest-performing assets over the past year despite a 7% year-to-date decline. 

Gold producers with all-in sustaining costs above US$3,900/oz have limited margin if prices test the World Gold Council's US$4,000/oz support level. COMEX speculative net long positions fell by 1,964 contracts to 114,854 before the latest selloff, suggesting much of the speculative selling had already occurred before the Hormuz escalation.

Fed Rate Expectations Test Gold's US$4,000 Threshold Ahead of CPI

Gold's current range reflects a 72% probability of a September Fed rate hike and Brent crude at $79.11 per barrel, placing it in the lower half of the World Gold Council's US$3,895 to US$4,305 target range. The World Gold Council says sustained trading below US$4,000/oz could trigger further selling, while prices above US$4,500/oz require "a strong signal of global deceleration." 

Markets now focus on the US June CPI report and Fed Chair Kevin Warsh's congressional testimony. A CPI reading above 3.9% would increase the risk of gold testing the lower end of its target range, while a reading of 3.5% or lower would strengthen the case for higher gold prices.