Gold Tumbles as Yields and Modi’s Gold Plea Trump Middle East Worries

Gold slides 1.3% to $4,480 as 10-year yield hits 4.63%; geopolitical turmoil fails to support as Fed rate cut hopes fade and demand wanes in India and China.

Gold is delivering an unexpected message to investors this week: even a simmering crisis in the Strait of Hormuz cannot rescue the metal from the grip of rising bond yields and shifting demand dynamics. The spot price slid as much as 1.3% on Monday to around $4,480 an ounce, extending a weekly loss of nearly 4% from the prior week. Over the past 30 days, bullion has now shed 6.21%, a stark reversal for an asset that had been riding high on geopolitical angst and central-bank buying.

The main brake on gold comes from the US bond market. The yield on ten-year Treasuries climbed to 4.631%, the highest since February 2025, while the 30-year benchmark touched a new year-to-date peak at 5.159%. With interest-paying instruments suddenly more attractive, the opportunity cost of holding a non-yielding asset like gold has jumped sharply. “Higher yields can prompt investors to unwind gold positions,” noted Daniel Hynes of ANZ, who sees the metal’s risk-reward profile deteriorating in the short term.

The Federal Reserve is at the heart of the calculus. Traders in fed-funds futures now assign just a 2.6% probability to a rate cut at the June meeting to the 3.25%-3.50% range, and a 97.4% chance that the central bank will keep the target range at 3.50%-3.75%. Recent data supports that hawkish stance: US consumer prices rose 3.8% in April, the fastest year-on-year pace since 2023, while wholesale prices surged at their strongest clip since 2022. Both readings have crushed any remaining hopes of imminent monetary easing.

The conflict around the Strait of Hormuz adds a cruel twist. Rather than driving investors into gold as a safe haven, the standoff is pushing oil above $100 a barrel, feeding inflation fears that make the Fed even less likely to cut rates. “Energy prices can keep inflation elevated for longer, which raises the odds that central banks maintain a restrictive line,” said one market participant. In effect, the same geopolitical event that should boost bullion is instead magnifying the headwind from yields.

Demand-side pressure is also building. In India, Prime Minister Narendra Modi has urged the public to defer fresh gold purchases, part of a broader effort to stabilise the rupee and rein in the trade deficit. An increase in import duties on precious metals is further dampening appetite in what is traditionally one of the world’s largest gold markets. Meanwhile, in China, speculative buyers have been trimming positions after the metal’s sharp rally, while the physical market shows signs of consolidation.

Yet not all demand signals are weak. The World Gold Council reported that global gold demand, including over-the-counter investments, hit a record 1,230.9 tonnes in the first quarter of 2026, up 2% from a year earlier. Chinese official-sector buying continues to provide a floor under the market during pullbacks, though it has not been enough to prevent the slide this month.

Technically, the metal has lost its recent momentum. The spot price is now trading below its 50-day moving average of $4,728.38, a key short-term trend line. Year to date gold still holds a gain of roughly 4.93%, but the earlier upward trajectory looks frayed. The immediate question is whether it can defend the area around Monday’s low and begin to close the gap toward its moving average.

Looking further out, ANZ expects monetary policy to loosen eventually and forecasts gold at $6,000 an ounce by mid-2027. For now, though, the interplay of sticky US inflation, climbing bond yields, and a slowdown in Asian consumer demand is proving too powerful even for a crisis in the Middle East to overcome.