Gold under pressure as Middle East escalation lifts yields

Gold came under selling pressure on Tuesday after an escalation in the Middle East drove global bond yields higher and lent support to the US dollar.

Reports of an attack on a commercial vessel transiting the Strait of Hormuz unsettled energy markets, leaving non-yielding assets such as gold exposed to the resulting rise in bond yields.

The broadly firmer global yield backdrop, alongside a strong US dollar, weighed on gold’s appeal.

Market participants remain focused on how the situation in the Strait of Hormuz develops, particularly with a new round of negotiations expected.

New escalations could weigh on sentiment and gold, as inflation expectations could increase again.

Attention now turns to this week’s Fed minutes, with markets currently pricing one interest rate increase by year-end. A more hawkish tilt from the Fed and other major central banks could drive yields higher and add selling pressure on gold, which has followed a downtrend since the start of the year.