Gold (XAU/USD) fell sharply on Tuesday, losing over 2.3% as a sudden escalation of the US-Iran conflict drove oil prices higher and lifted US Treasury yields, overshadowing a mixed batch of American economic data. The precious metal traded at $4,342 at the time of writing, having touched a daily low of $4,326 after opening near $4,461.
Geopolitical trigger: US and Iran exchange strikes
Newswires reported explosions in southern Iran on Tuesday, and US President Donald Trump confirmed that the US Air Force had launched strikes aimed at limiting Tehran’s missile capability and preventing sea mines from being placed in the Strait of Hormuz. The Strait, a critical chokepoint for global oil shipments, “currently has no mines (They have been completely removed or detonated!),” Trump said.
The military action sent West Texas Intermediate crude above $90 per barrel during the session; it was last quoted with gains of more than 4.2%. Energy markets reacted swiftly because the Strait of Hormuz handles roughly one-fifth of the world’s oil supply, and any disruption there tends to boost crude prices sharply.
US Treasury yields rise; rate-hike expectations firm
Higher oil prices fed through to bond markets. The 10-year US Treasury note yield climbed nearly four basis points to 4.792%, a level that makes non-yielding assets such as gold less attractive. The jump in yields also reflected shifting expectations for Federal Reserve policy.
Last week, Fed Chair Kevin Warsh delivered a hawkish speech at the Jackson Hole symposium, saying that if inflation stays stubbornly high the central bank has “work to do.” Market probabilities for a September rate hike have risen sharply since then. At the time of writing, Prime Terminal data showed a 71% chance of a quarter-point increase and a 29% chance of no change.
US data takes a back seat
Two important US releases were published on Tuesday but had little market impact given the geopolitical focus. The ISM Manufacturing PMI for August came in at 54.6, down from 55.6 in July and below the 55.2 consensus estimate, indicating that factory activity is still expanding but at a slower pace. Separately, the Job Openings and Labor Turnover Survey (JOLTS) for July reported 7.217 million vacancies, slightly under the 7.3 million forecast. Both figures suggest a cooling but still solid labour market.
Later this week the economic calendar includes the Fed’s Beige Book, weekly jobless claims, the ISM Services PMI for August, and the key Nonfarm Payrolls report on Friday. These releases could influence gold’s direction if geopolitical tensions ease.
Technical breakdown: key levels breached
The escalation of the US-Iran conflict accelerated gold’s existing downtrend. On its way lower, XAU/USD broke through several notable support levels, including the $4,400 round number and the 100-day simple moving average (SMA) at $4,365. The metal then pierced below $4,350, a level that had provided support during recent sessions.
The Relative Strength Index (RSI), which had been in bullish territory, turned bearish during the steep sell-off, indicating that sellers are gaining momentum. For bears to maintain control, gold needs to achieve a daily close below $4,350. The next downside targets are the day’s low at $4,326, followed by the $4,300 mark. If selling pressure continues, the 50-day SMA at $4,215 becomes the next area of interest.
On the upside, a move back above the 100-day SMA at $4,365 would neutralise the immediate bearish bias and open the way toward reclaiming $4,400.
Key takeaways
- Gold lost more than 2.3% on Tuesday after US and Iran exchanged military strikes, sending oil above $90 and the 10-year yield to 4.792%.
- Mixed US data – ISM Manufacturing PMI of 54.6 and JOLTS vacancies of 7.217 million – had little market impact as geopolitical risk dominated.
- Market pricing now implies a 71% probability of a Fed rate hike in September, up from below 40% before Chair Warsh’s hawkish Jackson Hole speech.
- Technically, gold broke below the 100-day SMA at $4,365 and the $4,350 support; a close below $4,350 would confirm bearish momentum, with $4,300 and $4,215 as next levels.
Common questions
Why did gold fall when geopolitical tensions rose?
Gold is often considered a safe haven, but in this case the jump in oil prices and US Treasury yields created a headwind. Higher yields increase the opportunity cost of holding non-yielding gold, and a stronger dollar (often linked to rising yields) can also weigh on the metal. The market’s focus shifted to the inflationary impact of higher oil and the prospect of tighter Fed policy.
What are the key US data releases this week?
The calendar includes the Fed’s Beige Book, weekly jobless claims, the ISM Services PMI for August, and the Nonfarm Payrolls report for August, expected on Friday. These could reignite dollar or yield moves if the geopolitical backdrop calms.
What technical levels should gold traders watch?
Immediate support is Tuesday’s low at $4,326, then $4,300. Below that, the 50-day SMA at $4,215 is key. On the upside, a close above the 100-day SMA at $4,365 would neutralise the bearish tone, with $4,400 as the next resistance.
For the latest on gold’s price action and the factors driving it, follow the live gold price.