Gold and silver declined sharply on Thursday as a fresh escalation in the Middle East conflict pushed oil prices toward $100 a barrel, strengthening expectations that the Federal Reserve could resume raising interest rates as early as next week.

Comex gold for August delivery fell as much as 2.6% to $4,042.50 an ounce during Thursday morning trading. By 11:45 a.m. in New York, the contract was trading at $4,050.80, down 2.4%. The pullback ended two sessions of dip-buying gains that had lifted bullion to a two-week high of $4,165.87 on Wednesday.

Silver recorded a steeper decline. The September contract dropped as much as 4.9% to $57.32 an ounce before paring losses to trade at $57.82, down 4.1%. Silver typically amplifies gold's moves because of its smaller, less liquid market and significant industrial-demand component, which makes it more sensitive to shifts in growth and rate expectations.

Yemen's Iran-backed Houthis opened a new front in the war by targeting two Saudi oil tankers in the Red Sea, while the US and Iran exchanged strikes for a 12th consecutive day. Oil rallied more than 5% toward $100 a barrel, and two-year Treasury yields rose for a sixth straight session — a combination that leaves non-yielding metals exposed. The dynamic underscores a tension at the heart of the current market: while geopolitical risk traditionally draws investors toward gold as a haven, mounting inflation pressure from surging crude prices is simultaneously hardening expectations for tighter monetary policy, which raises the opportunity cost of holding bullion. Rate swaps now price roughly a one-in-three chance that the Fed raises rates at next week's meeting, with a hike fully priced in for September, Bloomberg reports.

This week's bounce was driven by "short covering and dip buying, after technical supports held during the preceding selloff," rather than any aggressive build-up of new long positions, Bart Melek, global head of commodity strategy at TD Securities, said in a note. With rates rising, gold "may be destined to drop back to support at around $3,900 an ounce," Melek said, identifying resistance at $4,200.

Bullion has lost approximately a fifth of its value since the US and Israel launched strikes on Iran in late February, a selloff that ended the multiyear bull run which carried the metal to a record near $5,600 in January. Gold is now down 6.1% in 2026, hovering above the $4,000 level that some traders view as key support. Silver, which peaked at a record $85.73 on January 12, currently trades roughly a third below that high.

Miners Follow Metals Lower

Precious metals equities tracked the metals lower in New York morning trading. Newmont fell 1.4%, Agnico Eagle 1.8%, Barrick 1.1%, Kinross 2.2%, AngloGold Ashanti 2.4%, and Gold Fields 2.9%, while Wheaton Precious Metals shed 1%. Producers with silver exposure were hit hardest, with Coeur Mining down 3.5%, Pan American Silver 2.2%, and Hecla 2%.

(With files from Bloomberg)