Iran Strikes and Warsh Speech Knock Down Gold

Key Takeaways

• US forces struck Iranian launchers near the Strait of Hormuz, and Iran hit back at US bases in Jordan.
• Oil rose on fresh fears of disruption through the world's most important energy chokepoint.
• Fed Chair Kevin Warsh sounded hawkish at Jackson Hole, reviving September rate-hike bets.
• Gold fell over 3% on the week to around US$4,455 an ounce, though Wall Street remains split on direction.

Geopolitical risk in the Middle East has escalated again after US forces struck two Iranian rocket launchers on Larak Island near the Strait of Hormuz. US officials said the launchers were operated by Iran's Revolutionary Guard and that crews were preparing to fire rockets loaded with sea mines toward the Strait. US Central Command confirmed the launchers were destroyed (Newsweek).

Iran responded with what the Revolutionary Guards described as a combined ballistic missile and drone attack on two US air bases in Jordan. Reuters, citing Iranian media, reported the targets were King Hussein Air Base and Al-Azraq (Muwaffaq Salti) Air Base, while the Guards vowed further retaliation (Reuters, via Fox News). Jordan's Armed Forces said they intercepted eight missiles that entered Jordanian airspace, and a US official told Fox News that nearly all incoming missiles were intercepted, with no significant impact reported at the time of writing. Iranian state media claimed the strikes inflicted “heavy damage”, a claim that had not been independently verified. The exchange appears to mark the first acknowledged direct US strike on Iran since 29 July and puts focus back on the world's most important energy chokepoint.

Oil markets reacted quickly. Brent crude rose more than 2% as traders priced a higher risk of further disruption to shipping through Hormuz. Roughly 20% of the world's oil passes through the Strait, meaning even limited interference can have an outsized effect on energy prices.

Warsh also spoke at the Jackson Hole Economic Symposium and the message was taken as hawkish. He said the Fed “must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do,” signalling that a rate hike, or at least holding for longer, may be necessary. Following the speech, the market-implied probability of a September rate hike rose sharply, with CME Group's FedWatch tool moving to around 57.5% from about 35.5% the prior day (The Motley Fool).

Both the Warsh speech and the Iran strikes weighed on gold, and the price fell back below a near-term support level. Spot gold set a weekly low of US$4,445.45 just before 3pm ET on Friday before recovering to close the week around US$4,455 an ounce, a loss of over 3% on the week (Kitco).

The move lower may prove temporary. The latest Kitco News Weekly Gold Survey showed roughly half of Wall Street analysts still expect gold to gain ground in the week ahead, with several arguing that persistent inflation and large fiscal deficits could continue to support hard-asset demand even if the Fed holds or hikes. Others see scope for further consolidation if the dollar firms ahead of US jobs data. In other words, one hawkish headline has not settled the direction of the trend.

What it means for investors

Sharp, headline-driven moves are a normal feature of gold markets, particularly when geopolitics and central bank policy collide in the same week. For investors focused on the longer arc, pullbacks around events like Jackson Hole are often where accumulation happens rather than where trends end. Ainslie Bullion offers a full range of gold and silver bullion for investors looking to build a position through the cycle.

This article is general information only and does not constitute financial advice. Past performance is not indicative of future results. Always conduct your own research or consult a licensed financial adviser before making investment decisions.