Gold Slides as Real Yields Climb and Rate Hike Odds Rise
Gold futures opened at $4,135.20 per troy ounce on Monday, up 0.7% from Friday's settlement. However, within two hours, the contract slipped to $4,111.50. Spot metal traded at $4,045.55, a $5.06 gain that amounts to 0.13%. The catalyst behind this move was President Trump's announcement of negotiations with Iran and his decision to call off planned strikes.
The market expected gold to rally due to the reduced war risk premium, but it did the opposite. Instead of selling off hard or rallying, gold opened up 0.7%, faded 0.6%, and settled into a range that has held for weeks. The SPDR Gold Shares ETF added 0.24% to $372.42.
The reason behind this muted response is that the Iran conflict has functioned as a bearish force for gold in 2026, not a bullish one. Higher crude oil prices fed inflation expectations, which in turn fed rate projections, crushing the non-yielding metal. Removing the oil price from the equation removes both the safe-haven bid and the rate-hike pressure at the same time.
The Fed's decision to hold rates is also significant. In a 9-3 vote, the committee decided to maintain interest rates, with all three dissents coming from regional bank presidents who favored an immediate hike. This has increased the probability of a rate hike in September, with CME FedWatch now showing a 64.5% chance.
The bond market is pricing in this possibility, with two-year Treasury yields at 4.25% and ten-year yields at 4.69%. The thirty-year yield spiked to 5.25% last week, its highest since 2007. For gold, these real yields are a major problem, as they offer higher returns than the metal itself.