Gold Slides Below $4,000 as Waller Signals Possible Rate Hike

TLDR

• Gold fell nearly 3% on Monday, briefly dropping below $4,000 an ounce for the first time in three weeks
• Silver dropped 3.4% to its lowest settle value since December 4
• Fed Governor Christopher Waller signaled possible near-term rate hikes if inflation stays elevated
• Markets are now pricing in a 43% chance of a rate hike at the July 28-29 Fed meeting
• Gold recovered Tuesday, rising 0.54% to $4,022.87, with traders watching U.S. CPI data and Fed Chair Kevin Warsh’s testimony

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Gold prices fell sharply on Monday before recovering on Tuesday, as investors weighed rising inflation risks, Middle East tensions, and the possibility of higher U.S. interest rates.

Front-month Comex gold for July delivery dropped 2.6% to $3,997 on Monday. That was the largest single-day decline since June 24. It was also the second-lowest settle price for gold this year.

Silver took an even bigger hit. July delivery silver fell 3.4% to $57.634, hitting its lowest settle value since December 4. Silver is now down 17.8% year-to-date, while gold is down 7.6%.

Middle East Tensions Add to Pressure

The selloff came as tensions in the Middle East escalated. President Donald Trump announced the U.S. would reinstate a blockade of Iranian shipping in the Gulf and declared the U.S. the “Guardian of the Hormuz Strait.” He proposed a 20% fee on cargo passing through the waterway.

BREAKING: President Trump says the US is reinstating its blockade of the Strait of Hormuz for Iranian ships and customers.

Trump says the US will now be known as “The Guardian of the Strait of Hormuz” and will be “reimbursed” at a rate of 20% on all cargo shipped.

It appears… pic.twitter.com/MtjidgWMMM

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The move raised doubts about the ceasefire reached in June and pushed oil prices higher. Higher energy costs raised fresh concerns about inflation staying elevated for longer.

Crude prices extended their gains as traders assessed the risk of supply disruptions through the Strait of Hormuz. That renewed worries that energy-driven inflation could make it harder for the Fed to cut rates.

For gold, rising energy prices are a mixed signal. They can boost gold’s appeal as a store of value. But if they push the dollar and bond yields higher, that tends to weigh on the metal.

Fed Rate Hike Odds Rise

Fed Governor Christopher Waller said policymakers may need to raise interest rates soon if inflation continues to show broad-based pressure. His comments pushed rate hike expectations higher.

ANZ analysts said markets are now pricing in a 43% chance of a rate hike at the Fed’s July 28-29 meeting. Higher rates make non-yielding assets like gold less attractive.

Gold recovered on Tuesday, rising 0.54% to $4,022.87 an ounce. Silver also bounced, gaining 0.63% to $58.02. Investors were watching June U.S. consumer price index data and Fed Chair Kevin Warsh’s congressional testimony for clues on the rate path.

Michael Cuggino of Permanent Portfolio Family of Funds said the long-term case for gold remains strong, pointing to central bank buying from countries like Poland, China, and Russia. He noted the selloff accelerated after Warsh’s appointment, as investors feared rates could move higher.

He added that silver’s deeper drop reflects its industrial uses in technology, semiconductors, and housing, making it more sensitive to economic growth concerns.

Markets will be watching Warsh’s testimony and CPI data closely for signals on what the Fed does next.