US gold futures for August delivery fell sharply, sliding 2.5% to settle at $4,050.
The steep decline marks a significant reversal for the precious metal, which had recently found support near $4,063 following weak US jobs data that had briefly fueled bets on imminent rate cuts.
The sell-off is being driven by a resurgence of inflationary concerns linked to escalating tensions in the Middle East.
As geopolitical risks intensify, energy prices are climbing, raising the prospect that the Federal Reserve may be forced to maintain a hawkish stance or even consider rate hikes to counteract sticky inflation.
This dynamic undermines the safe-haven appeal of gold, as rising Treasury yields and the expectation of higher-for-longer interest rates increase the opportunity cost of holding non-yielding assets.
This development continues a volatile arc for gold in the second half of 2026.
After hitting a seven-month low in early July amid hawkish Fed signals, the metal briefly recovered on softer labor market data.