Gold and silver prices jumped on Monday as crude oil tumbled following a pause in US-Iranian strikes over the weekend.
Spot gold rose as much as 1.6% to $4,115 per ounce in early trading before surrendering about half that gain by lunchtime in London.
The move extended a 1.8% weekly advance, gold's sixth weekly gain since the Iran war began, achieved despite recent surges in oil prices and interest rates.
Silver climbed even more sharply, rising as much as 3.3% to $60.07 per ounce before giving back a third of that gain.
That followed a 5.5% jump the previous week, marking silver's seventh weekly increase since the conflict started.
The rally in metals coincided with a sharp retreat in energy markets.
Brent crude futures fell more than 6% to below $90 per barrel after the US refrained from striking Iran for a second consecutive night following 13 straight days of attacks to allow more time for diplomacy. Iran's army said on Sunday that Tehran had suspended its military response.
The pullback offered relief after Brent briefly surged above $101 per barrel the previous Thursday, when attacks on Saudi oil tankers in the Red Sea raised fears that supply disruptions could spread beyond the Strait of Hormuz to a second major shipping chokepoint.
Benchmark 10-year US Treasury yields eased 4 basis points to 4.6% on Monday, retreating from a nearly three-year high above 4.7% reached last week.
Even so, the yield has risen 17.0% since the Iran conflict began, despite the Federal Reserve leaving its policy rate unchanged throughout the period.
"There is a message here for the Fed," said Paul Christopher, head of global investment strategy at the Wells Fargo Investment Institute. "Uncertainties are piling up, and the bond market expects compensation for it."
The pressure is global. UK and German 10-year yields eased Monday from last week's peaks, a two-month high of 5.1% in the UK and a 15-year high of 3.2% in Germany, but remain up 15.8% and 19.6%, respectively, since the war began.
Japan's 10-year yield held near 2.8%, close to a 30-year high and up 31.1% since the US struck Iran at the end of February.
"The key question is whether governments can sustain these higher financing costs," warned Bruce Ikemizu, chief director of the Japan Bullion Market Association.
"It would not be surprising if, at some point, one or more countries were to face a fiscal crisis as a result of mounting budget deficits."
Fitch Ratings echoed those concerns last week, warning that the US-Iran conflict "highlights lingering fiscal risks through weaker GDP growth, higher interest costs, and, in some cases, moderate energy subsidies."
The agency forecasts developed-market government debt will reach $75.8 trillion, 104% of GDP, by the end of 2026.
US Defense Secretary Pete Hegseth has estimated the conflict has already cost the United States $37.5 billion, while Torsten Slok, chief economist at Apollo Global Management, cautioned that America's debt accumulation of roughly $7 billion per day "is atrophying the nation's ability to respond to a recession."
By Wednesday, the mood had shifted from momentum to wariness. After two volatile sessions, including a sharp Tuesday selloff in silver, precious metals found some breathing room as investors stepped back from aggressive positioning ahead of the Fed's decision.
In early trading, spot gold hovered around $4,036 per ounce, up 0.22%, while silver outperformed with a 1.3% bounce to $57.86 as bargain hunters returned. By the North American open, however, gold had slipped 0.27% to around $4,017, while silver held a modest 0.15% gain at around $57.08.
The geopolitical backdrop deteriorated as well. The brief pause in hostilities broke after Jordanian and US forces intercepted another Iranian missile barrage, sending crude oil up more than 4% as traders repriced chokepoint risk.
Brent traded near $85.79 and WTI near $83.04, with the Strait of Hormuz, which carries roughly 20% of the world's traded oil under normal conditions, best described as open but highly stressed. The 10-year Treasury yield sat near 4.62%, and the US dollar index firmed to 101.64.
For gold, the impact is two-sided: geopolitical risk supports defensive demand, but higher oil prices lift inflation expectations, keep yields firm, and cap the upside for non-yielding bullion.
The Fed's decision, due at 2 p.m. ET with Chair Kevin Warsh's press conference following at 2:30 p.m., headlines a week packed with central bank action: the Bank of England reports Thursday, and the Bank of Japan reports Friday. Both are expected to hold rates at 3.75% and 1.0%, respectively, with the BoJ likely to signal further tightening ahead.
While the Fed is widely expected to leave rates unchanged, the meeting is far from a clean hold. Futures pricing assigns roughly a one-in-three probability to a hike, a striking reversal from expectations of a rate cut before the conflict began, and a September hike is largely priced in.
Traders are also watching Thursday's GDP data and Friday's PCE inflation report. Perhaps the most notable feature of recent trading is not gold's gains but its resilience. Normally, a stronger dollar and rising Treasury yields would weigh heavily on bullion by raising the opportunity cost of holding a non-yielding asset.
Yet buyers have repeatedly emerged whenever prices drift toward the psychologically important $4,000 mark, reflecting persistent geopolitical uncertainty and inflation concerns.
If Warsh strikes a hawkish tone or signals elevated inflation risks, yields and the dollar could strengthen further, pressuring both metals.
Any hint of comfort with the inflation outlook, conversely, could revive expectations for easier policy and open the door to a broader precious metals recovery.
For now, with war risk, fiscal strain, and monetary uncertainty all pulling in different directions, traders appear unwilling to make that call before hearing directly from the central bank, leaving gold and silver in a holding pattern as one of the most closely watched policy decisions of the year approaches.
