Oil Drop Sparks Gold Rally as Rate-Hike Odds Soften

The recent pause in US-Iran strikes has led to a significant drop in oil prices, which in turn has caused gold to rise. On Monday, July 27, 2026, Brent crude fell roughly 7-8% to below $90 per barrel, its lowest level since July 20. This decrease in oil prices reduced inflation expectations, lowering the odds of a rate hike by the Federal Reserve.

As a result, gold's opportunity cost decreased, making it more attractive to investors. Gold climbed over 1% on Monday to trade around $4,088 per ounce, while silver outpaced gold, rising more than 2% to near $59 per ounce. The dual industrial and monetary demand engines for silver both recovered simultaneously when rate fears eased.

However, the market should remain cautious as there is no formal agreement between the US and Iran, and the Strait of Hormuz remains restricted. The pause in strikes does not necessarily mean a resolution to the conflict has been reached.

The Federal Reserve's decision on Wednesday, July 29, will be crucial in determining the future direction of gold prices. With rate-hike odds softened, gold's opportunity cost has fallen, making it more attractive to investors. The structural buyers, including central banks, have not paused their accumulation of gold during the conflict.