Middle East Risks and a Hawkish Fed Weigh on Gold, but Support Remains Near USD4,000/oz

Overview

This HSBC precious metals daily report focuses on the interaction between the situation in the Middle East, oil prices, FOMC rate expectations and precious metals prices. The report notes that escalating Iran-US-related conflict, rising oil prices, stronger yields and a stronger US dollar are collectively weighing on gold. At the same time, a decline in equities could trigger margin-related selling in gold, while silver, platinum and palladium have also been dragged lower.

Core views

The report's core view is that gold remains under pressure in the short term from higher oil prices, a stronger US dollar and rising interest-rate expectations driven by the situation in the Middle East, but the decline should not be extrapolated excessively. HSBC believes that higher rates have already been at least partly priced in, and that gold's decline below USD4,000/oz previously attracted strong buying support. Gold could rebound if geopolitical tensions ease. Although silver and platinum group metals have not recently benefited from their undervaluation, further price declines could attract end-user and physical buying.

Analysis framework

The report adopts an event-driven macro commodities analysis framework, combining the Middle East conflict, oil prices, the FOMC minutes, interest-rate expectations, US dollar movements, equity-market volatility, Asian physical demand and trading-desk behavior to assess short-term price pressure and potential support for precious metals.

Methodology notes

• Macro Commodities AnalysisGeopolitical Risk–Oil Price–Interest Rate–US Dollar Linkage Framework

  The Middle East conflict pushes up oil prices and inflation concerns, driving yields and the US dollar higher and thereby weighing on gold.

  The report views the situation in the Middle East as an important trigger for the current decline in gold, but believes its impact is more short term; an easing of tensions could instead support gold.

• Monetary Policy AnalysisFOMC Rate-Expectation Transmission

  Hawkish Fed expectations increase the opportunity cost of holding gold.

  The June FOMC minutes showed disagreement among policymakers over whether to raise rates or keep them unchanged. Market pricing for multiple rate hikes this year is creating near-term pressure on gold.

• Supply, Demand and Valuation MonitoringPhysical Buying and Relative Undervaluation Assessment

  Physical demand and end-user buying may strengthen after prices fall to key levels.

  The report notes that Asian physical demand for gold and silver is moderate and that premiums on the Shanghai Gold Exchange are flat. However, it believes that a break below USD4,000/oz in gold and below USD60/oz in silver could attract buying.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Gold

  Core research asset

  Strengths

  Buying interest is strong near USD4,000/oz; an easing of tensions could trigger a rebound, and higher rates may already be partly priced in.

  Weaknesses

  Under short-term pressure from rising oil prices, higher yields, a stronger US dollar and hawkish Fed expectations.

  Comparison

  Compared with silver and platinum group metals, gold is more directly driven by the US dollar, interest rates and safe-haven sentiment.

  Risks

  A continued rise in oil prices due to further escalation of the Middle East conflict, a more hawkish Fed, and sustained increases in the US dollar and yields.

• Silver

  Precious metals-linked asset

  Strengths

  The report considers its fundamentals undervalued, and a fall below USD60/oz could attract physical buying.

  Weaknesses

  Recent undervaluation has failed to provide effective price support, and silver has declined alongside gold and precious metals overall.

  Comparison

  Silver is more likely to be guided by gold, while also offering a point of observation for support from physical demand.

  Risks

  A further decline in gold, insufficient physical demand, and weaker risk appetite related to industrial demand.

• Platinum and Palladium

  Platinum group metals-related assets

  Strengths

  Prices are attractive to end users, and the report believes platinum group metals, particularly palladium, have conditions for a rebound.

  Weaknesses

  Intraday rebounds have weakened, and prices have recently failed to benefit from fundamental undervaluation.

  Comparison

  Palladium is more likely to be influenced by equity-market performance, while silver is more likely to follow gold.

  Risks

  A decline in equity markets, weak automotive and end-user demand, and reduced risk appetite.

• Crude Oil

  Macro driver

  Strengths

  The escalation of the Middle East conflict has significantly pushed up oil prices, making oil a key variable affecting precious metals.

  Weaknesses

  Higher oil prices are not unequivocally positive for gold because they raise concerns about inflation and higher interest rates.

  Comparison

  Crude oil affects gold indirectly through inflation expectations, yields and the US dollar, rather than acting as a positively correlated safe-haven asset.

  Risks

  If the conflict repeatedly escalates, further increases in oil prices could continue to weigh on gold.

Key data

• Gold Key Support AssessmentAround USD4,000/ozHSBC believes that the recent decline below USD4,000/oz attracted strong buying support, and another break below this level could also continue to attract buyers.
• WTI Crude Oil PriceApproximately USD76/bblThe report states that oil prices rose by nearly USD5/bbl, pushing WTI to approximately USD76/bbl and rekindling inflation concerns.
• Market-Implied FOMC Rate-Hike Magnitude8bp in July, 21bp in September, 27bp in October, 37bp in DecemberThe data come from the market-pricing observations of HSBC US economist Ryan Wang cited in the report at the time of writing.
• HSBC Federal Funds Rate ForecastHeld at 3.50%-3.75% from 2026 through 2027Ryan Wang maintained his long-term forecast that the FOMC would keep the federal funds target range unchanged.
• Potential Physical-Buying Trigger for SilverBelow USD60/ozThe report believes that a break below USD60/oz in silver could trigger more physical buyers to enter the market.
• Report Market Data DateClose on 2026-07-08The disclosure states that, unless otherwise noted, the market data in the report are as of the close on July 8, 2026.

Impact & implications

For investors, the short-term trading focus for gold has shifted from safe-haven buying to pressure from oil prices, interest rates and the US dollar. However, gold could rebound if tensions in the Middle East ease or the market confirms that higher rates have already been priced in. For silver and platinum group metals, current undervaluation has not yet translated into price support, but lower prices could boost physical and end-user demand.

Risks

• The situation in the Middle East could continue to escalate and push up oil prices, causing inflation concerns, yields and the US dollar to rise further.
• A more hawkish Fed stance or further increases in market rate-hike pricing could raise the opportunity cost of holding gold.
• A sharp decline in equity markets could trigger margin-related selling, amplifying short-term declines in gold and silver.
• Moderate Asian physical demand may be insufficient to provide adequate short-term support for precious metals.
• The undervaluation of silver and platinum group metals may continue to fail to translate into actual buying.

What to watch

• Whether the conflict in the Middle East eases, particularly developments involving Iran, the United States and the Gulf region.
• Whether WTI crude oil prices stabilize and their secondary effects on inflation expectations, yields and the US dollar.
• Changes in market rate-hike pricing ahead of subsequent FOMC meetings, particularly at the July, September, October and December meetings.
• The strength of buying interest around USD4,000/oz in gold and whether this level can be effectively held again.
• Shanghai Gold Exchange premiums, Asian physical demand and the activity of two-way corporate trading.
• Whether silver attracts more physical buying around USD60/oz.