Gold Extends Losses for Fourth Day as US-Iran Tensions Cap Gains from Weak Dollar

US., July 09 : Gold prices remained under pressure on Thursday, July 9, extending losses for a fourth straight session as renewed conflict between the United States and Iran reshaped market sentiment and heightened concerns over inflation. The latest decline in bullion came even as the US dollar weakened slightly, a factor that would ordinarily support precious metals. Instead, investors focused on the inflationary risks posed by rising crude oil prices and the possibility that central banks, particularly the US Federal Reserve, may keep interest rates elevated for longer or even consider another hike if price pressures intensify.

In the international market, spot gold traded marginally lower in early deals, continuing the downward trend seen over the past few sessions. The metal had already slipped to its weakest level since the beginning of July in the previous session, reflecting the market’s growing unease over the wider economic impact of geopolitical tensions in the Middle East. Silver also moved lower alongside gold, showing that the broader precious metals segment remained under pressure as traders reassessed the outlook for inflation, interest rates and safe-haven demand.

The decline in gold may appear counterintuitive at first glance because geopolitical tensions usually support safe-haven assets. However, the current market reaction has been shaped by a different set of concerns. Investors are increasingly worried that any prolonged military confrontation in the Middle East could push oil prices sharply higher, which in turn would feed into inflation across major economies. That inflation risk is particularly important because it can alter expectations for monetary policy, and gold tends to struggle when interest rates rise or are expected to remain high.

The latest flashpoint came after the United States reportedly widened military action against Iran overnight, accusing Tehran of breaching the understanding that had temporarily halted hostilities. The move signalled a renewed escalation in the conflict and immediately raised fears of a deeper disruption in the region. Given the Middle East’s central role in global energy supply, any intensification of tensions tends to have a direct impact on crude oil prices. That is exactly what happened as oil benchmarks climbed in response to the deteriorating geopolitical backdrop.

Brent crude hovered close to the USD 80 per barrel mark in early trade, while West Texas Intermediate also registered gains. The rise in oil prices has become one of the most important variables for financial markets because it directly affects inflation expectations. Costlier crude can translate into higher fuel prices, increased transportation expenses and more expensive industrial inputs. Over time, these pressures can pass through to consumers, complicating the inflation outlook for central banks that are already balancing fragile growth with sticky price trends.

This link between oil and inflation is central to understanding why gold has weakened despite the uncertain geopolitical backdrop. Gold does not offer any fixed return, dividend or interest income. When rates rise, or when markets expect them to stay elevated, the opportunity cost of holding bullion increases. Investors often shift toward assets that can generate yield, such as government bonds or interest-bearing instruments, reducing the appeal of precious metals. As a result, any development that strengthens the case for tighter monetary policy can weigh on gold, even during periods of geopolitical instability.

Market participants are now closely tracking how the Federal Reserve may interpret the latest developments. If higher oil prices begin to influence inflation forecasts, policymakers may become more cautious about cutting rates or may even keep the door open for another increase. That possibility has become more relevant after recent readings from inflation-sensitive commodities and fresh geopolitical disruptions. According to rate expectations reflected in the derivatives market, traders are assigning meaningful odds to the possibility of tighter policy at the Fed’s next meeting, underscoring how seriously the inflation risk is being taken.

The Federal Reserve’s latest meeting minutes have added another layer to the debate. Policymakers acknowledged that the path of interest rates remains uncertain and depends heavily on how inflation evolves in the months ahead. The minutes reportedly discussed a range of possibilities, including scenarios in which price pressures cool further and others in which inflation remains stubbornly high. That split in the outlook has kept investors cautious, especially when external shocks such as rising oil prices threaten to complicate the disinflation process.

A stronger inflation narrative is not the only factor influencing bullion. The dollar, which often moves inversely to gold, offered some support to prices after easing slightly in early trade. A weaker US currency generally makes gold cheaper for buyers using other currencies, helping cushion declines in the metal. But in the current environment, the supportive effect of the softer dollar has not been enough to offset the larger macroeconomic concerns created by higher oil prices and a more uncertain rate path.

This dynamic explains why gold’s losses have persisted despite traditional support factors. In many periods, a combination of geopolitical stress and a weaker dollar would be enough to push bullion higher. This time, however, the market is focusing more on the second-round consequences of the US-Iran conflict, especially its effect on energy markets and inflation expectations. That shift in focus has changed the usual safe-haven trade and kept pressure on precious metals.

In India, the domestic bullion market is also reacting to these global cues. Gold and silver contracts on the Multi Commodity Exchange were not active at the time of reporting in the latest session, but the previous close reflected the same weak undertone seen internationally. Following the recent US strike on Iran, gold futures had settled more than 1 per cent lower, while silver futures also ended lower. The domestic market has been highly sensitive to international bullion trends, movements in the rupee-dollar exchange rate and swings in crude oil prices, all of which are currently being influenced by geopolitical developments.

For Indian investors, the global picture matters because international prices, currency fluctuations and import costs together determine local bullion valuations. If crude oil remains elevated and the dollar strengthens later, it could further influence inflation expectations in India as well, particularly through imported energy costs. That would have implications not only for gold demand but also for broader monetary policy expectations and consumer sentiment.

Silver, often seen as both a precious metal and an industrial commodity, has also softened in this environment. While silver sometimes benefits from safe-haven demand alongside gold, it is also vulnerable to broader growth concerns and changing industrial demand expectations. The metal’s decline suggests that traders are not yet positioning aggressively for a sustained flight to safety. Instead, they appear to be adopting a more selective approach, weighing the inflationary fallout of geopolitical tensions against the traditional role of precious metals as protective assets.

The coming sessions will likely hinge on three key developments. First, markets will watch whether the US-Iran confrontation intensifies further and whether there are any disruptions to energy flows from the region. Second, investors will monitor crude oil prices for signs that the latest spike is turning into a prolonged rally, which would deepen inflation concerns. Third, attention will remain fixed on the Federal Reserve and incoming US macroeconomic data to gauge whether policymakers are becoming more worried about renewed price pressures.

If oil prices continue to climb and Fed officials strike a hawkish tone, gold could remain volatile and may struggle to stage a meaningful rebound in the near term. On the other hand, if tensions ease, crude prices cool and the dollar remains soft, bullion could find some support after its recent slide. For now, though, the market’s message is clear: inflation fears linked to the Middle East crisis are outweighing the usual safe-haven boost that geopolitical uncertainty often gives to gold.

With bullion now down for four consecutive sessions, traders are entering the second half of July with a cautious outlook. Gold’s near-term direction will depend less on traditional risk aversion and more on whether the geopolitical crisis feeds a broader inflation shock. As long as oil stays elevated and the possibility of tighter monetary policy remains on the table, the metal may find it difficult to recover decisively, even with support from a weaker dollar and global uncertainty.