Oil Spike Dampens Federal Reserve Rate Cut Expectations

The appeal of non-yielding gold has decreased as investors scale back bets that the Federal Reserve will slash interest rates in 2026. The probability of a U.S. rate drawdown of at least 25 basis points at the December gathering has fallen to 16% from 21%, according to CME FedWatch.

Related Brief16h ago

commodities

Gold Rises as Diplomacy Eases Inflation Fears, Shifting Its Role From Hedge to Rate-Play

Gold is rising not because of fear, but because fear is fading. The metal climbed 0.8% to nearly $4,770 per ounce as oil prices fell below $100 per barrel, easing inflation concerns that had weighed on financial markets for more than six weeks. The drop in energy costs followed unexpected overtures from Iranian officials expressing interest in negotiations with the US—despite Washington’s ongoing naval blockade of the Strait of Hormuz. President Donald Trump confirmed the outreach, while Iranian President Masoud Pezeshkian stated Tehran was ready to continue peace talks under international law. The US Navy’s enforcement of restricted shipping through Iranian waters had previously amplified supply risks and inflation jitters, driving demand for gold as a hedge. But with diplomacy gaining ground, the calculus has shifted. Lower oil prices have cooled inflation expectations, reducing pressure on central banks to ease policy. US money markets now price in less than a 20% chance of a Federal Reserve rate cut by December. As a result, gold is no longer reacting to geopolitical risk—it’s responding to interest rate expectations. The metal, which produces no yield, is gaining value not in spite of stable rates, but because the outlook for higher-for-longer rates is tempering inflation fears without increasing opportunity cost enough to deter investors. Gold’s role has changed: it is no longer a hedge against war, but a read on the Fed’s next move.

This shift in expectations is driven by worries over an energy-fueled inflation spike. U.S. consumer price growth accelerated in March due to gasoline pump costs. Brent oil futures jumped 6.9% to $101.77 a barrel, while U.S. West Texas Intermediate crude futures added 7.3% to $103.56 a barrel.

Related Brief1d ago

commodities

Gold Resilience Breaks Inverse Correlation With $100 Oil

Spot gold prices recovered to $4700 after an initial drop to $4642 per ounce. The decline occurred as Brent crude jumped 8% to $102.60 per barrel following US President Donald Trump's threat to blockade the Strait of Hormuz. The surge in oil prices drove inflation expectations higher, lifting market forecasts for the Federal Reserve's year-end key interest rate by 3 basis points to 3.6%. This shift typically pressures gold, which has maintained a seven-week inverse correlation with oil during the current Middle East conflict. Before the conflict, the 20-day rolling correlation between the two assets was positive at 0.6. By the end of March, it shifted to negative 0.5. The current resilience in gold prices has weakened that relationship to 0.2.

Oil prices rose above the $100 a barrel threshold following the U.S. Navy's blockade of Iranian ports and coastal areas in the Strait of Hormuz.

Related Brief1d ago

treasury yields

U.S. Navy Blockade of Strait of Hormuz Pushes Treasury Yields Higher

The 10-year U.S. Treasury note yield rose more than 1 basis point to 4.333%. The 2-year Treasury note yield rose more than 2 basis points to 3.8242%. The 30-year Treasury note yield advanced less than 1 basis point to 4.923%. These movements reflect investor reactions to the U.S. Navy's process of blockading ships entering or leaving the Strait of Hormuz. The blockade follows the failure of negotiations between Washington and Tehran over the weekend to produce an agreement to end the Middle East conflict. This action clouds the inflation outlook, as the most recent U.S. CPI reading came in at its highest level in 2 years, stoking concerns that an energy price shock could spread to other goods and services.

Related Brief16h ago

commodities

Gold Rises as Diplomacy Eases Inflation Fears, Shifting Its Role From Hedge to Rate-Play

Related Brief1d ago

commodities

Gold Resilience Breaks Inverse Correlation With $100 Oil

Oil prices rose above the $100 a barrel threshold following the U.S. Navy's blockade of Iranian ports and coastal areas in the Strait of Hormuz.

Related Brief1d ago

treasury yields

U.S. Navy Blockade of Strait of Hormuz Pushes Treasury Yields Higher

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