FX.co ★ XAU/USD, GOLD

XAU/USD With hawkish interest rate forecasts continuing to weigh on the non-yielding metal amid ongoing tensions in the Middle East, gold (XAU/USDS) begins the week under pressure, lingering near one-month lows. As of this writing, XAU/USD is down around 2.0% for the day, trading at about $4,520 during the American session. With tensions rising and uncertainties surrounding the future of US-Iran peace negotiations, market sentiment is still precarious. A drone attack that was allegedly launched from Iran caused a fire to start at a petroleum industrial complex in Fujairah, UAE. A US naval ship near the island of Jask was hit by two missiles earlier in the day, according to Iran's Fars news agency, after the ship allegedly disregarded the Islamic Revolutionary Guard Corps' (IRGC) orders to stop. The incident comes after US President Donald Trump announced the launch of a naval programme called "Project Freedom", which aims to accompany commercial ships that are stuck in the Strait of Hormuz. Tehran responded by threatening to assault US forces if they tried to get close to or inside the waterway. But according to Axios, a US official denied that any American ship had been struck.Diplomatic efforts are still at a standstill in the interim. Nuclear disputes remain unsolved after Washington rejected Iran's updated 14-point proposal and made a counteroffer that is currently being reviewed in Tehran. The violence continues with no apparent end in sight, despite the ceasefire appearing to be in place. Oil prices remain high due to ongoing supply interruptions in the Strait of Hormuz, maintaining the risk of global inflation. The ensuing energy shock is putting further pressure on central banks, especially the Federal Reserve (Fed), to maintain higher borrowing costs for an extended period of time or even tighten policy if inflationary pressures worsen. The non-yielding metal is being impacted by this, which is driving up US Treasury yields. The markets are already pricing in rate hikes for next year, with the likelihood of a January 2027 rate hike jumping to 22% from almost 0% a week ago, according to the CME FedWatch Tool, which indicates the Fed is projected to keep rates through this year.