Gold fell more than 3% on Monday to its lowest since early August after oil jumped 4% on Trump's rejection of an Iranian offer to reopen the Strait of Hormuz. Dearer oil revived bets on another US rate hike.
At a glance
- Spot gold slid to about $4,121 an ounce, its weakest level since August 5, while silver lost about 5%.
- Traders now see a 70.3% chance that the Federal Reserve raises rates again in October, up on the back of costlier oil.
- On MCX, October gold fell Rs 3,691 to Rs 1,47,202 per 10 grams, below the Rs 1.5 lakh mark.
Background
Gold pays no interest, so it tends to lose appeal when interest rates rise and bonds pay more. Oil matters because pricier fuel pushes up inflation, and the US Federal Reserve fights inflation by raising rates. The Fed already raised rates this month. Traffic through the Strait of Hormuz, a key route for Gulf oil, has been disrupted by the US-Iran conflict.
What happened
Spot gold fell 3% to $4,156.45 an ounce by 0814 GMT on Monday, its lowest price since August 5. The losses deepened through the European session, and by mid-afternoon gold traded near $4,121, down more than 3.5%. US gold futures for December delivery dropped 3.1% to $4,188.80 in the morning.
Silver fell hardest, losing about 5% to around $61 an ounce, its weakest since early August. Platinum slipped 2.4% to $1,735.88 and palladium fell 2.2% to $1,239.60.
Why it happened
The trigger was oil. Iran's foreign minister Abbas Araghchi offered on Friday to reopen the Strait of Hormuz within seven days if Washington met Tehran's conditions, including lifting its naval blockade. Trump told reporters on Saturday, "They made a proposal but I rejected it." Brent crude then jumped 4% to $108.48 a barrel on Monday.
Costlier oil feeds straight into inflation expectations. That makes another Fed rate hike more likely, and CME's FedWatch tool now puts the odds of an October hike at 70.3%. The 10-year Treasury yield rose to 5.27%, its highest since 2007. Higher yields and a firmer dollar both work against gold, which pays no interest.
What it means for India
Indian prices followed the global slide. MCX gold for October delivery fell Rs 3,691, or 2.45%, to Rs 1,47,202 per 10 grams after touching a low of Rs 1,46,705. December silver on MCX lost Rs 7,531, or 3.1%, to Rs 2,35,612 per kg.
"Gold prices have corrected sharply after the recent rally, amid a sharp rise in U.S. Treasury yields and growing expectations of further Federal Reserve tightening," said N S Ramaswamy, head of commodities at Ventura. For jewellery buyers shopping ahead of the festive season, the dip lowers the rupee cost of gold. For investors, it shows how closely bullion now tracks oil and the Fed.
Our read
Outlook: bearish. As long as oil stays above $100 and the market prices an October Fed hike, gold faces higher yields and a firm dollar. A diplomatic breakthrough on Hormuz would remove much of that pressure quickly.
What to watch
- US PCE inflation on Wednesday, the ISM factory survey on Thursday and payrolls on Friday, which will shape the Fed's October decision.
- Talks by mediators with US and Iranian officials on an amended version of Iran's seven-day Hormuz proposal.
- Whether spot gold holds the $4,100 to $4,150 zone after breaking below $4,250.
For information only, not investment advice.
Gold price in India
metalscost.com India reference price as of 2026-10-03.
Detailed analysis
Timeline
- 2026-09-25: Iran's foreign minister offers to reopen the Strait of Hormuz within seven days if US conditions are met.
- 2026-09-26: Trump says he rejected the Iranian proposal.
- 2026-09-28: Brent jumps 4% to $108.48 and spot gold falls 3% to a seven-week low of $4,156.45.
Interest Rates
Markets price a 70.3% chance of an October Fed hike, and the 10-year Treasury yield hit 5.27%, its highest since 2007.
Currency Impact
A firmer dollar made gold more expensive for buyers outside the US and added to Monday's selling.
Geopolitical Risks
Trump's rejection of Iran's Hormuz offer kept the key oil route disrupted and sent Brent up 4% to $108.48.
What could lift prices
- A deal that reopens the Strait of Hormuz would pull oil lower and ease the pressure for more Fed hikes.
- Lower rupee prices below Rs 1.5 lakh could draw festive-season jewellery buying in India.
What could weigh on prices
- Brent above $108 keeps inflation fears alive and supports an October rate hike.
- Strong US jobs or inflation data this week could lift yields and the dollar further.
Country impact
| Country | Impact | Reason |
|---|---|---|
| India | High | MCX gold fell below Rs 1.5 lakh per 10 grams, cutting the cost for jewellery buyers and marking down investor holdings. |
| United States | High | Fed rate expectations and Treasury yields are driving the move in gold. |
| Iran | Medium | Its rejected offer to reopen Hormuz is the source of Monday's oil spike. |
Industry impact
| Industry | Effect | Reason |
|---|---|---|
| Gold Mining | Negative | Miners' shares and realised prices fall when bullion drops 3% in a day. |
| Jewellery | Positive | A lower rupee gold price helps jewellers and shoppers ahead of the festive season. |
Who gains, who loses
- Festive-season jewellery buyers in India: They pay less after MCX gold fell Rs 3,691 per 10 grams in a day.
- Gold and silver ETF holders: Their holdings lost value as gold fell 3% and silver 4.8% in one session.
Other ways this could play out
- If US jobs and inflation data come in soft, rate-hike odds could fall and gold could recover part of Monday's loss.
- If oil keeps climbing on the Hormuz standoff, gold could test the $4,100 area.
Price risks
- A sudden US-Iran breakthrough would undercut the oil-driven case for a Fed hike and weaken the bearish view.
- Safe-haven buying could return if the conflict escalates beyond oil markets.
Technical view
Price is trading below both its 20-period and 50-period moving averages, a bearish alignment.
Computed from metalscost.com's own stored price history.
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