Gold retreats below $4,500 as Israel-Iran conflict fuels inflation fears
Geopolitical escalation drives oil prices higher, complicating the central bank’s inflation outlook and weighing on the precious metal.
Gold futures for August delivery opened at $4,354 per troy ounce on Monday, marking a 0.3% decline from Friday’s closing price of $4,365.30. Early trading saw the benchmark metal dip further to $4,322.80 by 7:05 a.m. ET, breaking below the $4,500 range that had characterised most of the previous week. The downturn follows an exchange of missile strikes between Israel and Iran, an escalation that has pushed oil prices higher and intensified concerns about global inflation.
The geopolitical tension has introduced a complex dynamic for the Federal Reserve as it prepares for its next meeting next week. Rising oil prices act as a direct input into consumer costs, reinforcing the central bank’s focus on price stability. Markets will seek clarity on the extent to which energy costs are bleeding into broader inflation metrics following the release of the Consumer Price Index report on Wednesday. The Producer Price Index, the Fed’s primary gauge of inflation, is scheduled for release on Thursday.
A strong jobs report released on Friday has already shifted the Federal Reserve’s attention squarely toward inflation data. High interest rates typically act as a headwind for gold prices, as the precious metal does not yield interest. With the central bank likely to prioritise inflation control over other economic supports, the opportunity cost of holding non-yielding assets remains a significant factor for investors.
Despite the recent pullback, the longer-term trend for gold has been robust. As of 29 January 2026, the one-year gain for gold was recorded at 95.6%. The metal’s ability to maintain value amidst geopolitical uncertainty and rising inflation expectations continues to attract institutional interest, even as short-term volatility disrupts price levels.
The distinction between spot and futures prices remains critical for market participants. Gold futures are exchange-traded contracts that mandate a transaction at a specific price on a future date, offering greater liquidity than physical gold. These contracts settle either financially or via delivery, with supply and demand dynamics driven by factors including geopolitical risk and monetary policy expectations.
