Why Gold Rose Above $4,600 as the Hormuz Crisis Deepened

Oil created both a tailwind and a threat

Oil was both a signal of Hormuz risk and a transmission channel into financial markets. Reuters reported that oil prices rallied as markets weighed the outlook for reopening the strait, while gold reached a nine-week high during an earlier phase of the standoff.

Initially, higher oil prices can reinforce gold demand by raising fears of an energy shock and broader economic disruption. But the relationship can reverse. If expensive oil produces persistent inflation, markets may price fewer Federal Reserve rate cuts—or even renewed tightening. Higher Treasury yields and a stronger dollar raise the opportunity cost of holding non-yielding gold.

That pressure was visible in July, when Reuters reported that fresh U.S.–Iran tensions lifted oil prices and the dollar, increasing expectations that interest rates could remain higher for longer and weighing on bullion. Gold therefore benefits most when geopolitical risk rises without a corresponding surge in real yields and dollar strength.

Why the rally is larger than a short-lived war premium

Gold’s 37.05% annual gain suggests that the Hormuz episode is not the whole story. The latest headlines added urgency to a market that was already trading at historically elevated levels, but the available data do not establish how much of the annual increase can be attributed specifically to central-bank buying, portfolio insurance or geopolitical risk.

A more defensible conclusion is that the episode exposed gold’s sensitivity to several forces at once:

• Geopolitical uncertainty: stalled negotiations and unclear shipping conditions increased demand for defensive assets.
• Energy-inflation risk: higher oil prices raised concerns about purchasing power and economic disruption, while also threatening to push rates higher.
• Interest-rate expectations: lower yields or expectations of easier policy can support gold; higher real yields can undermine it.
• Futures-market positioning: futures provide a way for banks, producers, consumers and asset managers to hedge exposure, but they also allow leveraged positions that can amplify both rallies and reversals.

The result is a price that can respond sharply in either direction. In August, progress toward reopening Hormuz was associated with stronger gold prices in part because it reduced expectations of an oil-driven Federal Reserve rate hike. That reaction shows why gold is not simply a “war up, gold up” asset: the effect of a geopolitical event depends on how it changes oil, the dollar, yields and central-bank expectations.

What Hong Kong’s 145-kilogram delivery says about the gold market

Hong Kong’s gold futures market provided a separate but related sign of changing bullion flows. HKEX’s U.S.-dollar gold futures contract recorded physical delivery of 145 kilograms on August 19, more than double the previous 63-kilogram record set in December 2018. Since the contract’s July 6 relaunch, average daily volume reached 9,974 contracts, with a notional value of about $1.35 billion and more than 30 participating market players.

The delivery figure matters because it shows that the contract is connecting derivatives trading with physical settlement rather than functioning only as a venue for cash-settled speculation. The contract represents one kilogram of high-purity gold and is physically delivered in Hong Kong.

That supports Hong Kong’s ambition to become a regional precious-metals trading and risk-management centre. The contract’s combination of U.S.-dollar and offshore-renminbi denominations, along with Hong Kong delivery, gives market participants another venue for managing bullion exposure as sanctions and trade restrictions reshape established routes. HKEX explicitly describes the product as serving Mainland and international participants.

However, a single delivery record is not proof that Hong Kong has displaced London, New York or Shanghai. A durable global hub would require sustained liquidity across maturities, reliable clearing and delivery, broad international participation, and a deep surrounding network of vaults, refiners and traders. The recent figures demonstrate momentum—not yet market dominance.

What could happen next to gold prices?

The outlook is highly dependent on which risk becomes dominant.

A constructive scenario for gold

Gold could remain supported if diplomacy stays stalled, shipping risks persist and investors continue to seek protection from a wider regional conflict. A Federal Reserve hold, falling real yields or a weaker dollar would make that geopolitical demand more powerful by reducing the cost of holding bullion.

A reversal scenario

The rally could unwind if a credible agreement restores commercial shipping through Hormuz and reduces the perceived probability of escalation. Gold would face additional pressure if oil remained high enough to lift inflation expectations, strengthen the dollar and push Treasury yields higher. A recent reversal illustrated that combination: gold futures fell as surging Treasury yields, a firmer dollar and renewed Hormuz uncertainty converged.

The key takeaway is that $4,600 is better understood as a headline-sensitive market level than as a fixed fundamental valuation. The Hormuz crisis helped add a geopolitical premium, but the next move will depend on whether safe-haven demand or rate-driven selling has greater influence.