Gold nears $4,420 as Middle East tensions drive haven demand

Gold and silver rose in early trading Wednesday as investors sought safety amid escalating US-Iran tensions, even as oil’s surge past $100 a barrel and elevated Treasury yields worked against the metals.

Spot gold traded near $4,417.87, up 1.46%, while spot silver was at $67.37, up 2.46%, according to Wednesday’s market pricing.

Oil spike and a weaker dollar support metals

Brent crude was trading at $100.72 a barrel, while WTI crude had risen to $95.70.

The US dollar weakened against major currencies, which typically makes gold and silver cheaper for buyers holding other currencies and adds support to prices.

Even so, Treasury yields stayed elevated, with the 10-year yield near 4.81%, its highest level since October 25, 2023, a headwind that usually pressures non-yielding assets like gold and silver.

Strait of Hormuz in focus

Tensions escalated further after Iran attacked US warships in the Gulf of Oman late Tuesday.

The US responded Wednesday by destroying five Iranian oil tankers, according to a senior US defense official.

Unverified reports also emerged Wednesday that Iranian vessels were preparing to move into the Strait of Hormuz, a 90-mile waterway that has carried around 21% of global oil supplies.

Those vessels were later reported to have turned back toward Iran.

The escalation follows Saturday’s attacks on two US warships in the Gulf of Oman, part of a broader pattern of tit-for-tat strikes between the two countries in recent days.

Inflation data looms large

Markets are currently pricing a 60% chance the Federal Reserve raises rates by 25 basis points at its meeting on September 15-16.

That outlook will be tested by two key inflation readings this week: the Producer Price Index on Thursday and the Consumer Price Index on Friday.

Given the recent jump in oil prices, both reports are likely to carry more weight than usual with policymakers and traders.

Analysts describe the setup for metals as mixed.

Higher crude prices and higher yields typically weigh on gold and silver, but in the short term, a weaker dollar, safe-haven demand, and uncertainty over Gulf oil supply are offsetting that pressure.

Key levels to watch

Gold is trading between support at $4,347 and resistance at $4,422.

A break above resistance opens the door to targets at $4,465 and $4,512, while a drop below support could send prices toward $4,290 and then $4,263.

Silver has support at $64.73, with a break lower potentially opening a path to $62.57. On the upside, clearing $67.21 could push prices toward $68.74 and then $70.76.

Traders say gold’s near-term direction now hinges almost entirely on Thursday’s and Friday’s inflation data.

A hotter-than-expected reading would likely keep yields elevated and cap the metals’ rally, while a softer print could ease rate expectations and open room for gold to break higher.