Spot gold slipped modestly in early Monday trading, briefly falling below the US$4,000 level. The move was not an isolated event but a direct reflection of the latest escalation in the U.S.-Iran conflict over the weekend. Crude oil prices jumped more than 3%, reaching their highest level since June 11, intensifying global inflation concerns and reinforcing expectations that the Federal Reserve will keep interest rates higher for longer, or even resume rate hikes. Meanwhile, the U.S. Dollar Index strengthened slightly to 100.86, adding further downward pressure on gold.

Gold experienced significant volatility last week, ultimately ending the week down around 2.5%, marking its largest weekly decline since early June. The conflict remains centered on the ongoing confrontation between the United States and Iran in the Middle East. The U.S. has carried out multiple nights of airstrikes targeting Iranian infrastructure, including bridges, airports, air defense systems, and even nuclear power plant construction sites. Iran has responded with drone and missile attacks targeting U.S. military facilities in Jordan as well as installations in Kuwait and Bahrain, while disruptions to shipping through the Strait of Hormuz have heightened concerns over global energy supplies.

Since the outbreak of the U.S.-Iran conflict in late February, gold prices have fallen by approximately 25%. A stronger U.S. dollar and mounting global inflation concerns have been the primary drivers behind the sell-off, pushing global interest rates higher. As one of the world's most important energy shipping routes, instability in the Strait of Hormuz has amplified supply chain risks, causing long-term inflation concerns to outweigh the traditional safe-haven appeal of gold.

At the same time, the U.S. economy continues to demonstrate resilience. Retail sales rose modestly in June, consumer confidence climbed to a five-month high, and the labor market remained stable. While these indicators have eased recession concerns, they have also given the Federal Reserve greater flexibility in maintaining its inflation-fighting stance. Markets have largely ruled out a rate hike this month, but the probability of a September hike remains around 57%. Recent comments from Fed officials have been mixed, with some emphasizing persistent inflation risks while others acknowledge the continued strength of the labor market.

Overall, the gold market remains caught between competing forces. The ongoing escalation in the U.S.-Iran conflict has boosted oil prices and inflation expectations, weighing on gold in the short term. However, should the conflict expand further across the region or severely disrupt global supply chains, safe-haven demand could once again become the dominant market driver. Conversely, if geopolitical tensions ease and U.S. economic data remain resilient, providing greater clarity on the Fed's policy outlook, gold may continue to face downside pressure.

The economic calendar is relatively light this week, with the European Central Bank's policy decision and several U.S. economic reports being the primary events to watch. In such an environment, geopolitical headlines are likely to have an even greater impact on market sentiment. For investors, the US$4,000 level has become a critical psychological and technical support level. While short-term volatility is expected to remain elevated, gold's long-term role as a hedge against inflation and uncertainty remains intact.

Market Insight:

On the 4-hour chart, gold continues to trade in a consolidation range, with both the MACD lines and histogram hovering near the zero line, suggesting weakening momentum. A seasonal summer low may be quietly taking shape. Investors should closely monitor developments in the Middle East and upcoming comments from Federal Reserve officials to identify opportunities while carefully managing risk.