Gold prices declined significantly on Monday, September 28, 2026, as the ongoing crisis in the Strait of Hormuz and rising expectations of a US interest rate hike weighed on the market. The price of gold fell to below $4,206 per ounce, down over 2% from the previous week. In recent trading, spot gold was down 1.7% at $4,212.11 per ounce, while silver fell 2.9% to $62.45 per ounce.
The decline in gold prices coincided with a rise in oil prices after Iran announced it would not ease its conditions for reopening the Strait of Hormuz. The development came after US President Donald Trump rejected an Iranian proposal to open the waterway for seven days. Trump stated that he expects negotiations to resume within the week. The ongoing tensions between Iran and the US have kept energy costs high, fueling inflationary pressures and increasing expectations of further interest rate hikes.
The prospect of higher US interest rates has also contributed to the decline in gold prices. Cleveland Federal Reserve President Beth Hammack stated that long-term US Treasury yields are rising due to improved growth expectations, concerns about government debt, and expectations of further interest rate hikes. The Federal Reserve had unanimously voted to raise the benchmark interest rate by 25 basis points in mid-September, with several officials indicating that additional hikes may be necessary.
Market expectations of a US interest rate hike in October are currently at around 65%. Global X ETFS analyst Justin Lin noted that gold remains sensitive to changes in oil prices and shifting expectations about a potential resolution to the Middle East conflict. Many traditional gold buyers may continue to wait until the Iran-US situation becomes clearer, while sellers are more focused on changes in real yields, which have continued to rise.
The spread between 10-year and 2-year US Treasury yields narrowed to 17 basis points last week, the lowest level since early 2025. A flattening yield curve is often seen as a potential indicator of a recession. Meanwhile, gold prices have traded within a relatively narrow range in September, between $4,230 and $4,510 per ounce, as investors reassess US monetary policy expectations.
The decline in gold prices has also been influenced by a stronger US dollar, with the Bloomberg Dollar Index rising 0.1% after a 2% gain since the start of the month. Other precious metals, including platinum and palladium, fell over 2% in early trading. The ongoing interplay of factors, including higher oil prices, the Iran crisis, and rising real yields, has created a challenging environment for gold.
Gold prices are currently well below their record high of around $5,600 per ounce, reached in January 2026. As investors navigate the complex landscape of global economic and geopolitical risks, the outlook for gold and other commodities remains uncertain. The ongoing tensions in the Middle East and shifting US monetary policy expectations will likely continue to influence gold prices in the coming weeks.
Key points
- Gold prices fell over 1.8% due to the Iran crisis and US interest rate hike expectations.
- US interest rate hike expectations rose after Federal Reserve officials indicated further hikes may be necessary.
- The ongoing Iran-US crisis has kept energy costs high, fueling inflationary pressures and impacting gold prices.
