Comex gold drops below $4,000 as Iran conflict fuels rate fears
Escalating US-Iran military hostilities are pushing gold and silver prices lower by reviving investor expectations that resulting energy inflation will force the Federal Reserve to keep interest rates elevated.
Comex gold futures fell below the $4,000 mark on Thursday, July 16, dropping $74 to an intraday low of $3,977 per troy ounce. Silver followed the downward trajectory, sliding $1.80 to $55.65, its lowest level since early December. The declines mirrored sharp losses on India's Multi Commodity Exchange, where near-month gold fell ₹1,733 to ₹1,40,117 per 10 grams and silver dropped ₹5,530 to ₹2,15,090 per kilogram.
The sell-off in precious metals stems from a sharp escalation in military hostilities between the United States and Iran that has derailed an interim truce. The US intensified strikes against Iranian missile storage and launch sites near the Strait of Hormuz for a fifth day, with President Donald Trump pledging to continue until Iran stops attacking vessels and reopens the shipping route. Iran responded with drone and missile attacks on US allies, warning it would "crush" key Middle Eastern targets if the US targets its infrastructure.
Rather than seeking traditional safe-haven protection in bullion, investors are unwinding precious metals positions due to the monetary policy implications of the conflict. Disruptions near the Strait of Hormuz have pushed Brent crude above $85 a barrel, a 15% premium over pre-conflict levels, though still well below the nearly $120 peak seen during the height of the war. This surge in energy prices has reignited fears of persistent inflation, reinforcing expectations that the Federal Reserve will maintain higher interest rates for an extended period.
Non-yielding assets like gold and silver are highly sensitive to the opportunity cost of capital, making them vulnerable to a hawkish central bank. The current price action accelerates a broader downtrend that saw gold post a 14% decline in the second quarter, its worst quarterly performance since 2013. From a recent peak of ₹1,48,089, Indian gold contracts have now erased nearly ₹8,000 in just nine trading sessions.
Traders are now watching critical technical levels that could trigger further downside momentum in both metals. A break below $3,955 on Comex gold would push the metal to its lowest price in nearly eight months. For silver, a drop beneath ₹2.10 lakh for MCX futures would mark the white metal's lowest level since late March, erasing a massive rally that had previously taken it above ₹3 lakh.
