Gold paused its two-day retreat that had knocked prices by more than 3.5%, with bullion hovering near $4,445 an ounce at one stage. As of 7:52 a.m. in Singapore, spot prices were up 0.2% at $4,448.64 an ounce. Silver held at $66.56, while platinum and palladium saw little movement.
American forces struck a target on an island within the Strait of Hormuz, and Iran answered with attacks on the United Arab Emirates and Jordan - their first exchange in a month. The latest escalation highlights persistent tensions between Washington and Tehran, with the two sides disputing the status of the strait following over six months of fighting that has roiled energy markets. Oil advanced further after chalking up its largest daily rise in three weeks on Monday. Higher fuel costs risk fanning inflation and could prompt the Federal Reserve to lift rates - typically a headwind for non-yielding gold.
Bullion jumped nearly 10% in August, the strongest monthly advance since January, supported by the US Treasury's mid-month surprise to expand bond buybacks to curb borrowing costs. That move rekindled what traders call the so-called debasement trade, fueled by worries about sovereign debt loads and currency devaluation - a narrative that also propelled gold's 2025 rally. Momentum faded after Fed Chairman Kevin Warsh delivered a hawkish address on Friday pledging to fight inflation, prompting markets to price the likelihood of a rate increase above 60% for the Sept. 15-16 meeting. Prices have since slipped back below the widely watched 200-day moving average.
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The Bloomberg Dollar Spot Index, a barometer of the US currency, was flat following a 0.2% decline in the previous session. Elevated energy prices and shifting rate expectations remain the key near-term drivers for bullion.
