Commodity wrap: Gold hits 1-week low as oil surges 5% on Mideast escalation

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Gold fell to a one-week low on Monday as energy prices surged on renewed tensions in the Middle East between the US and Iran.Gold prices, however, recovered some of the losses and were trading above $4,800 per ounce. Silver on COMEX also dropped more than 2%.Fears of a breakdown in the delicate ceasefire between the US and Iran caused oil prices to jump over 5%. This surge followed the US seizure of an Iranian cargo ship and the continued near-complete halt of traffic through the Strait of Hormuz.Meanwhile, copper prices fell as uncertainty over the ceasefire between the US and Iran weighed on sentiments.Gold falls over 1%Gold prices on COMEX fell more than 1% at the time of writing to trade around $4,820 per ounce.The front-month gold contract on COMEX fell to $4,752 an ounce earlier on Monday, its lowest level since April 13.Renewed US-Iran tensions introduced uncertainty into markets regarding the prospect of a peace deal, leading to a rise in the dollar to its highest level in a week, though it later pared some of these gains.Concurrently, benchmark 10-year US Treasury yields increased, making non-yielding assets like bullion less attractive due to a higher opportunity cost.The probability of a 25-basis point rate cut before the end of the year has fallen to about 32%, down from 37% at the close of last week, according to the CME’s FedWatch Tool.This change reflects investor sentiment regarding ongoing geopolitical tensions, including the continued closure of the Strait of Hormuz to shipping and reports of skirmishes between the US and Iran over the weekend, despite the existing ceasefire.“As mentioned before, neither gold nor silver are acting as safe havens. Quite the opposite, as this role now belongs to the US dollar, for now,” said David Morrison, senior market analyst at Trade Nation.Oil surgesFears of supply disruptions, coupled with the increased risk of a wider conflict between the US and Iran, led to a surge in crude oil prices following renewed attacks on commercial vessels in the Strait of Hormuz.At the time of writing, the price of West Texas Intermediate was at $87.12 per barrel, up 5.4%, while Brent was at $95.12 per barrel, up 5.2%.Reports that Iran had reopened the Strait of Hormuz caused both front-month Brent and WTI crude oil prices to drop to their lowest levels in nearly six weeks on Friday afternoon.Initially, Tehran announced t...

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