Gold climbed more than 1.5% on Friday to trade above $4,850 an ounce, after Iran reopened the Strait of Hormuz under a temporary truce, easing geopolitical tensions and dampening fears of renewed inflation. The move coincided with a weaker US dollar, falling Treasury yields and a sharp selloff in oil.
Strait of Hormuz reopens under 10-day truce
Iranian foreign minister Abbas Araghchi said the Strait of Hormuz was reopened to all commercial vessels as part of a 10-day ceasefire between Israel and Lebanon. Former US president Donald Trump separately confirmed that maritime traffic through the key shipping lane had resumed.
The reopening of the strategic chokepoint, through which a large share of global oil shipments pass, triggered a broad reaction across energy and metals markets.
Oil slumps as supply risk eases
US crude benchmark WTI fell more than 9.5% in one sequence to $81.74 per barrel and, in later trading, futures briefly dropped over 10% to trade below $84, touching the lowest levels in nearly five weeks.
The abrupt move lower in oil prices reduced the perceived risk of sustained energy-driven inflation. According to LSEG Workspace data, traders shifted to price in around 14 basis points of Federal Reserve policy easing by the end of 2026 following the slide in crude.
Fed officials stick to cautious line on rates
Despite market pricing for future easing, Federal Reserve officials signaled little urgency to cut rates.
Fed governor Christopher Waller said he would favor holding interest rates steady if inflation and labor market pressures persisted, warning that conflict in the Middle East could still pose an upside risk to inflation.
San Francisco Fed president Mary Daly described current policy as “slightly restrictive” and estimated the near-neutral rate at about 3%. She said she could keep rates unchanged unless inflation data shift meaningfully, indicating a wait-and-see stance.
Dollar and Treasury yields retreat
The Dollar Index slipped 0.17% to 98.01, extending a slide that has left the greenback nearly 2% weaker over the past month. The 10-year US Treasury yield fell seven basis points to 4.246%, its lowest level since mid-March, as markets adjusted to lower geopolitical risk and revived expectations of eventual rate cuts.
A softer dollar typically supports dollar-denominated commodities by making them cheaper for holders of other currencies, while lower yields reduce the opportunity cost of holding non-yielding assets such as gold.
Gold pulls back from resistance despite supportive backdrop
Even with supportive macro conditions, bullion struggled to clear key technical levels. Gold was unable to hold above its 50-day simple moving average (SMA) at $4,899 and slipped back below the April 8 peak of $4,857.
Analysts now see scope for consolidation around current levels, with a potential retest of the $4,900–$4,950 area if buying interest resumes.
Technical indicators still point to positive momentum, with the Relative Strength Index trending higher. On the downside, a break below $4,750 could expose the 100-day SMA near $4,699, with additional support around the 20-day SMA close to $4,549.
Markets pivot from geopolitical risk to policy expectations
The temporary de-escalation in the Middle East has removed a significant near-term uncertainty that had supported energy prices and, by extension, inflation expectations. Lower oil prices feed directly into headline inflation measures, easing pressure on central banks in the short run.
As geopolitical risk recedes, market focus is swinging back to monetary policy. The weaker dollar makes US dollar–priced assets more attractive to overseas buyers and can enhance returns on alternative assets, including precious metals.
However, a gap is emerging between market pricing and policymakers’ stated intentions. While rate derivatives imply some easing, LSEG data show the probability that the Federal Reserve does not cut rates at all in 2026 stands near 69%, a view echoed by several major financial institutions.
Comments from Waller and Daly underscore this cautious tone. Waller has argued that a series of economic shocks is making it harder to dismiss rising inflation pressures, raising the threshold for any policy pivot. Daly is monitoring whether earlier increases in oil prices are feeding through to broader costs, reinforcing a data-dependent stance.
Outlook: data and Fed messaging in focus
The mix of a weaker dollar and lower bond yields is usually constructive for gold, yet the metal’s failure to secure a break above its 50-day average points to limited conviction among traders.
Market participants are weighing reduced geopolitical risk and softer inflation expectations against the possibility that the Fed keeps rates higher for longer. Incoming inflation and labor data will be critical for shaping that narrative.
If inflation continues to cool and the recent drop in energy prices persists, pressure may build on policymakers to acknowledge the market’s pricing for cuts. Conversely, any signs of stubborn price pressures or renewed tensions could validate the Fed’s cautious stance and trigger a swift repricing across commodities, currencies and risk assets.
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