Gold falls, silver drops over 2%

Gold and silver fall as markets price in higher US interest rates

Gold and silver prices declined during Monday's trading, pressured by the sharp rise in oil prices following renewed geopolitical tensions in the Strait of Hormuz, which strengthened expectations that US interest rates will remain elevated to counter potential inflationary pressures.

Meanwhile, the US Dollar Index, which measures the performance of the US currency against a basket of six major currencies, slipped 0.1% to 101.05.

Nicholas Frappell, Global Head of Institutional Markets at ABC Refinery, said the key question is whether a partial or complete closure of the Strait of Hormuz will eventually slow economic activity, which could later support gold as a safe-haven hedge, Reuters reported.

The decline comes amid escalating military attacks between US and Iranian forces, after Tehran targeted US bases on Sunday and announced the closure of the Strait of Hormuz.

Data from the CME FedWatch Tool indicate that markets are currently pricing in a 72% probability that the Federal Reserve will raise interest rates in September, up from about 63% last week.

Markets are also awaiting Federal Reserve Chair Kevin Warsh's first semiannual testimony before Congress this week, along with key US economic data, including the Consumer Price Index (CPI), Producer Price Index (PPI), and retail sales figures.