On Monday, gold prices (XAU/USD) fell by approximately 1.49%, trading at $4,163 after reaching a high of $4,217, as the US Dollar strengthened amid escalating hostilities in the Middle East and renewed concerns over global energy supplies [1]. The decline in gold was attributed to a rally in oil prices and heightened inflation fears, with West Texas Intermediate (WTI) crude oil rising more than 2% to $93.69, driven by Houthi attacks on Saudi Arabia, Iranian strikes on ships in the Strait of Hormuz, and ongoing conflict between Russia and Ukraine [1][2]. Despite US President Donald Trump’s announcement of an 'energy ceasefire' between Russia and Ukraine, Ukrainian President Volodymyr Zelensky and subsequent Russian strikes cast doubt on the effectiveness of the agreement [2][3]. The Kremlin stated that 'contacts are ongoing' but did not confirm any deal [2][3].
Oil markets remained volatile, with WTI climbing to a two-week high of around $93.50, up 2.75% on the day, after recovering from an intraday low of $89.02 [2]. Brent crude also jumped 2% to nearly $108 per barrel, and US diesel futures rose slightly, with the average nationwide diesel price at $6.26 per gallon, almost 80% higher than at the start of the year [3]. Saudi Aramco CEO Amin Nasser warned that 'the squeeze on crude oil is serious,' and OPEC Secretary General Haitham Al Ghais revised the group’s 2026 global oil demand growth forecast down to 400,000 barrels per day from 1.4 million earlier in the year [2].
The surge in energy prices kept US Treasury yields elevated, with the 10-year note yield flat at 5.242%, and the US Dollar Index (DXY) up 0.3% at 102.56 [1]. Money markets continued to price in a Federal Reserve rate hike, with a 20% chance of a 0.25% increase in December and nearly 90% probability for a hike by year-end, according to Prime Terminal data [1]. Cleveland Fed President Beth Hammack stated that higher rates are needed as inflation broadens, and she holds one of the highest projections for the neutral rate within the FOMC [1].
Technically, gold’s rally stalled near $4,200, with the market structure indicating a potential challenge of the $4,000 level if bearish momentum resumes. The Relative Strength Index (RSI) has risen but remains below the neutral 50 level, suggesting only mild bullish momentum [1]. Traders are now focused on upcoming US inflation data, with the Consumer Price Index (CPI) due Wednesday and the Producer Price Index (PPI) on Thursday, as well as further commentary from Federal Reserve officials, including Chair Kevin Warsh [1].
CONCLUSION
Gold prices declined sharply while oil surged as geopolitical tensions in the Middle East and the failure of a Russia-Ukraine energy ceasefire fueled inflation fears and market volatility. The resulting spike in energy prices reinforced expectations of higher interest rates, keeping pressure on gold and supporting the US Dollar. Market participants are now closely watching upcoming US inflation data and Federal Reserve commentary for further direction.