Gold Stumbles as Rate Hike Odds and Middle East Tensions Collide

The market’s current posture is dictated by a sharp rise in September rate-hike expectations, which now sit near 60%. This shift follows a stern address from Kevin Warsh at Jackson Hole, which sent the two-year Treasury yield surging late last week. Investors are now bracing for a barrage of labor and manufacturing data, including Tuesday’s JOLTS job openings and Friday’s August payrolls, which will serve as the next litmus test for the Federal Reserve’s policy path.

Simultaneously, geopolitical risk has returned to the fore after U.S. forces struck Iranian rocket launchers near the Strait of Hormuz on Sunday. The military action, the first in over a month, pushed Brent crude prices toward $91 a barrel. While rising oil typically bolsters gold as a hedge against volatility, it also complicates the inflation narrative by strengthening the case for higher interest rates. Technically, gold remains under pressure after falling below its 200-day moving average, with bears eyeing the $4,396 support level. Silver, conversely, showed resilience with a 0.91% gain, though it faces significant overhead resistance between $67.75 and $68.40.