Global spot gold prices closed down $119 at $4,000 per ounce on 13/7. By the morning of 14/7, prices continued their descent, currently trading at $3,996.

The precious metal's decline followed US President Donald Trump's announcement of reimposing a naval blockade on Iran. This action sent oil prices soaring, fueling inflation fears and increasing the likelihood of the US Federal Reserve maintaining high interest rates for an extended period. On the morning of 13/7, gold prices briefly touched $3,985. This marked the second consecutive session of decline for gold.

Global gold prices saw a sharp decline on 13/7. *Chart: Kitco*

Beyond the renewed blockade on Iranian seaports, President Trump also indicated plans to levy a "protection fee" equivalent to 20% of cargo value on vessels transiting Hormuz. Following this news, global oil prices surged by over 9% during the 13/7 trading session. Brent and WTI crude are currently trading at $83,3 and $79 per barrel, respectively.

The surge in oil prices is expected to drive up energy and transportation costs, potentially compelling central banks to either maintain current interest rates for longer or even increase them to control inflation. The FedWatch Tool currently indicates that investors are pricing in a 75% probability of the US Federal Reserve (Fed) hiking rates in september.

"Oil prices are climbing due to ongoing conflict in the Middle East, while the probability of the Fed tightening its policy is also growing", stated Fawad Razaqzada, a market analyst at Forex.com. "These factors are detrimental to non-interest-bearing assets like gold". He further suggested that if oil prices continue their upward trend, gold could fall to $3,800 or even $3,500 as selling pressure intensifies.

On 14/7, Fed Chairman Kevin Warsh is scheduled to deliver his inaugural monetary policy testimony before the US Congress. Investors will closely monitor this event for insights into the future direction of interest rates. Additionally, the US is set to release several key economic figures this week, including june inflation data, june retail sales, and weekly jobless claims.

Ha Thu (according to Reuters, Kitco)