Gold’s $4,696 Tightrope: Oil at $106 Fans Inflation as the Fed Weighs Another Hike

Gold trades near $4,695 an ounce as rising US inflation forces Fed hawkishness while Middle East oil spike drives safe-haven demand, leaving metal in a narrow range with central banks offering support.

Gold is caught in a familiar but increasingly uncomfortable bind. Geopolitical turmoil in the Middle East has pushed crude above $106 a barrel, reinforcing inflation fears that are simultaneously driving the Federal Reserve toward a more hawkish stance. The result: the yellow metal is stuck in a narrow range, unable to break higher despite a potent risk premium.

On Tuesday, gold was trading at $4,695.80 an ounce, down 1.05% from Monday’s close of $4,745.60. The session left it roughly 13% below the January record high and just under the 50-day moving average of $4,758.86. The relative strength index of 49.8 points to a market that is neither overbought nor oversold — a neutral picture that reflects the absence of a clear catalyst.

Inflation Data Tightens the Vise

The main headwind is coming from US consumer prices. April’s CPI reading of 3.8% marked the highest level since May 2023, and economists had penciled in a range of 3.7% to 3.8% ahead of the release. That print has all but extinguished expectations for a rate cut in 2026, and market participants are now pricing in a 25-36% probability of another rate increase instead.

Banks including Bank of America and Goldman Sachs have already pulled back their rate-cut forecasts. The rising real yield on Treasuries is sapping gold’s appeal, since the metal offers no income stream. A strengthening dollar is compounding the pressure.

Oil Shock Deepens the Conflict

Yet the same forces that are hurting gold are also supporting it. The de facto blockade of the Strait of Hormuz has sent Brent crude above $106 a barrel, feeding through to broader price pressures. That energy-led inflation is the very reason the Fed is leaning hawkish, creating a circular logic: higher oil lifts inflation, which keeps rates elevated, which weighs on gold — but the geopolitical source of that oil spike also drives safe-haven demand.

The standoff in the Middle East shows no signs of easing. After failed US-Iran talks, a ceasefire is described as acutely threatened, with reports of fresh airstrikes on Tehran and potential naval protection for commercial vessels in the strait.

Central Banks and Miners Offer Support

Underlying demand remains sturdy. Central banks purchased a net 244 tonnes of gold in the first quarter, with emerging-market buyers leading a push to reduce dollar dependence. That structural bid has helped cushion the recent correction.

Mining companies are also adding positive signals. Barrick Gold reported a jump in net profit to $1.60 billion in its latest quarter, up from $474 million a year earlier, on production of 719,000 ounces. OceanaGold announced high-grade drilling results from its Haile mine in the US, with intercepts of 30.64 grams per tonne over 15.5 metres.

Washington’s Next Move

All eyes now turn to the US Senate, which is set to vote on Kevin Warsh’s appointment as the next Federal Reserve chair. His monetary policy stance is expected to provide the next major directional cue for gold markets. Until then, the metal remains trapped between the push of geopolitics and the pull of tightening financial conditions.