Gold Extends Losses As Hormuz Stalemate Fuels Inflation And Rate-Hike Fears

KUALA LUMPUR,MAY,2026 – Gold prices remained under pressure as the prolonged Strait of Hormuz crisis continued to fuel inflation concerns, sending global bond yields higher and weakening demand for non-yielding assets such as bullion.

According to Bloomberg, bullion fell as much as 1.3% before paring most of its losses to trade around US$4,535 an ounce, after retreating nearly 4% the previous week. The decline came as the United States and Iran remained far apart on any deal to end weeks of conflict and reopen the Strait of Hormuz, a key waterway for global energy flows.

The pressure on gold has intensified because the Hormuz deadlock is keeping oil prices elevated and raising fears that inflation could stay higher for longer. When energy prices rise sharply, investors often reassess expectations for interest rates, especially if central banks are forced to maintain tighter policy to control inflation.

Reuters reported that gold steadied on Monday after briefly falling to its lowest level in more than one and a half months. Spot gold was around US$4,536.45 an ounce, while US gold futures for June delivery fell 0.5% to US$4,539.90.

A major factor behind the weakness was the selloff in long-term US Treasury bonds, which pushed yields to their highest level since February 2025. Higher yields make gold less attractive because bullion does not pay interest, while government bonds become more appealing to investors seeking returns.

The latest market move shows how gold is being pulled between two opposing forces. On one hand, geopolitical risk in the Middle East usually supports safe-haven demand. On the other hand, the inflationary impact of higher oil prices is lifting yields and strengthening expectations that the Federal Reserve may not cut interest rates soon.

Bloomberg reported that oil climbed after President Donald Trump renewed threats against Iran, increasing concerns that inflation could remain elevated. That, in turn, raised the odds of a rate hike, which would weigh on gold.

The pressure was already visible last week. Reuters reported that gold fell to a more than one-week low on Friday as US Treasury yields and the dollar climbed, with inflation concerns linked to the Iran war reinforcing bets for higher interest rates. Spot gold was down 2% at US$4,557.61 an ounce by Friday afternoon, while US gold futures settled 2.7% lower at US$4,561.90.

A stronger US dollar also added pressure to the gold market. Since gold is priced in dollars, a stronger greenback makes bullion more expensive for buyers using other currencies, which can reduce international demand.

Analysts said gold is now struggling because the market is no longer only pricing in war risk, but also the broader economic cost of the conflict. If oil remains high and shipping routes stay disrupted, inflation may prove harder to control, forcing central banks to keep borrowing costs elevated.

Reuters cited analysts from OANDA and J.P. Morgan who pointed to expectations of a possible Federal Reserve rate hike by year-end. J.P. Morgan also revised its 2026 average gold price forecast lower, from US$5,708 to US$5,243 an ounce, citing weaker near-term demand.

Technical indicators also suggest gold is under short-term pressure. Reuters reported that gold was trading above its 200-day moving average near US$4,340, but remained below its 50-day moving average around US$4,730, showing that the metal has yet to regain stronger upward momentum.

Other precious metals also weakened. Silver fell 1.3% to US$74.98, platinum dropped 0.5% to US$1,963.88, and palladium declined 1.2% to US$1,396.14, reflecting broader pressure across the metals market.

The wider bond market reaction shows that investors are becoming more concerned about inflation. The Financial Times reported that global bond markets extended their selloff as the Middle East energy crisis raised fears of prolonged inflation, with US 30-year Treasury yields climbing to 5.16% and Brent crude rising above US$111 a barrel.

For gold investors, the key question is whether safe-haven buying can overcome the negative impact of higher yields. If tensions worsen sharply, bullion could still attract demand as a defensive asset. However, if the main market reaction remains higher oil prices, higher yields and a stronger dollar, gold may continue to face selling pressure.

The market is also watching any progress in US-Iran negotiations and efforts to reopen the Strait of Hormuz. A breakthrough could ease inflation fears and reduce pressure on bond markets, potentially supporting gold. However, continued deadlock may keep traders focused on the risk of higher energy costs and tighter monetary policy.

Overall, gold’s latest decline reflects a more complicated market environment. The Middle East crisis has not automatically lifted bullion as a safe haven because investors are also worried that the same crisis will keep inflation high and interest rates elevated.

For now, gold remains under pressure as traders balance geopolitical uncertainty, oil-driven inflation, rising bond yields and Federal Reserve policy expectations. The direction of bullion in the coming days is likely to depend heavily on developments around the Strait of Hormuz, US-Iran tensions and signals from global central banks.