A curious contradiction is playing out in the commodities market. The US military struck Iranian positions near the Strait of Hormuz, a tanker came under fire, and oil prices shot up around 2%. Yet gold, the traditional haven, took a sharp knock — sliding 1.47% on Thursday to $4,422 an ounce, with a intraday low of $4,397.86, its weakest in nearly two months.
The selling looks counterintuitive, but the logic is brutally straightforward: escalating energy costs fan inflation fears, and that keeps the Federal Reserve on a hawkish path. Higher oil prices feed into broader price pressures, strengthening the case for the Fed to hold rates elevated — or even raise them further. For a non-yielding asset like gold, that’s a direct hit to its appeal.
Fed officials drove the point home on Thursday. Neel Kashkari stressed that inflation control remains the singular focus. Lisa Cook said rates should stay steady for now and did not rule out additional tightening. Philip Jefferson judged current policy to be appropriate. Their collective message: no pivot in sight. With real yields on Treasuries still attractive, the opportunity cost of holding bullion has become punishing.
The dollar added to the pressure. The geopolitical shock triggered a flight into the greenback, making gold more expensive for buyers outside the dollar zone. That suppressed the safe-haven reflex that typically accompanies such crises. Gold now sits roughly 18% below its 52-week high of $5,450, reached in January. While it still stands 42% higher year-on-year — from $3,335 — the current pullback shows that its crisis-hedge credentials have limits.
Should investors sell immediately? Or is it worth buying Gold?
The weakness is spreading across the precious metals complex. Silver lost 1.7% to $73.34, platinum fell 0.5%, and palladium declined 0.7%. The S&P GSCI Precious Metals Index, at around 5,962 points, has shed over 3.2% year-to-date. The message is clear: macro forces and dollar strength, not physical demand, are calling the shots.
The next test arrives later on Thursday with the release of PCE data — the Fed’s preferred inflation gauge. A hotter-than-expected reading would further dim hopes for rate cuts and likely give the dollar another lift, a bearish scenario for gold. A softer print, on the other hand, could quickly turn sentiment. The metal has been trading in a tight $4,400–$4,600 channel for roughly ten days; the PCE numbers may determine which side of that range gives way.
Any fresh disruption to shipping through the Strait of Hormuz — through which about a fifth of global oil and LNG shipments pass — could amplify the rate-driven headwind. For gold to reclaim its safe-haven mantle, either the Fed would need to blink, or oil prices would have to stop feeding into rate expectations. Right now, neither appears likely.
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