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Gold prices showed unexpected resilience on Monday, even as oil surged above $100 a barrel after US President Donald Trump threatened a blockade of the Strait of Hormuz following the collapse of US-Iran peace talks. Weekend negotiations in Pakistan ended without agreement after 21 hours of talks. Washington reportedly insisted on the complete dismantling of what remained of Iran’s uranium enrichment capabilities, while Tehran demanded the immediate lifting of all economic sanctions before extending the truce. The failure of diplomacy quickly revived fears that the fragile ceasefire in the region could collapse.
Trump responded with a dramatic escalation, saying the US Navy would begin the process of blockading ships entering or leaving the Strait of Hormuz. US military officials later clarified that the action would be limited to vessels going to or from Iranian ports, rather than a full closure affecting all traffic. Iran nevertheless condemned the move as an act of war and warned of a harsh response. Reports also suggested the White House was considering limited strikes on Iran.
The renewed threat to one of the world’s most important energy chokepoints triggered an immediate reaction across commodity markets. Brent crude rose nearly 8% in early Monday trading to $102.60 per barrel, reversing the steep losses seen last week when hopes for a diplomatic breakthrough had briefly improved sentiment.
European natural gas futures jumped as much as 17%, and jet fuel prices remained under intense pressure. According to Airports Council International Europe, the continent could face a jet fuel shortage within three weeks if the disruption in the Strait of Hormuz continues. Argus Media data showed jet fuel prices had already risen to $1,573 per tonne last week, more than double the roughly $750 level seen before the outbreak of the Iran conflict.
The return of $100-plus oil immediately revived concerns about another inflation wave, especially given the global importance of Gulf energy exports.
Gold initially moved in the opposite direction. Spot prices dropped as much as 2.2% in early Monday trading to around $4,642 to $4,644 per ounce, after opening near $4,749. The decline extended Friday’s 0.4% loss, which had followed profit-taking from a three-week high of $4,857.56 per ounce.
But the sell-off did not last. By London lunchtime, gold had recovered roughly four-fifths of its earlier decline and returned toward $4,700 per ounce, leaving it only modestly lower on the day.
That rebound reinforced the idea that bullion is becoming more resilient, even in an environment where surging oil would normally pressure gold more aggressively through the interest-rate channel.
Bruce Ikemizu, chief director of the Japan Bullion Market Association, said gold “seems to be developing some resilience on the downside,” adding that the market appeared increasingly willing to buy assets that had been liquidated into cash.
The most striking feature of Monday’s session was the weakening link between gold and oil.
Under normal conditions, the two commodities often move in the same direction because both are priced in US dollars and influenced by shared macroeconomic factors such as inflation expectations and currency moves. Before the latest Middle East conflict began at the end of February, the 20-day rolling correlation between the two was strongly positive, with an r coefficient near 0.6.
That changed as the conflict deepened. Oil surged amid supply fears, but gold began to weaken as higher energy prices heightened inflation concerns and prompted investors to expect tighter Federal Reserve policy. By the end of March, the rolling correlation had turned negative, with the coefficient around -0.5.
Now that the inverse relationship is fading as well. Recent high-frequency estimates suggest the correlation has weakened to around 0.2. In other words, gold is no longer falling as reliably as oil rises. Nicky Shiels, head of metals strategy at MKS Pamp, had warned that Trump’s escalation could send oil higher and gold lower given the recent inverse relationship. But Monday’s rebound suggested that this pattern may be losing strength.
Gold’s short-term challenge remains the same: higher oil prices can feed inflation, and inflation can force central banks to maintain tighter monetary policy. That dynamic was clearly visible on Monday. The US Dollar Index rose by around 0.3% to 0.5% after having fallen to a six-week low in the previous session. A stronger dollar makes gold more expensive for holders of other currencies, reducing its appeal.
At the same time, bond yields moved higher. The benchmark 10-year US Treasury yield rose two basis points to around 4.3%, while Japan’s 10-year government bond yield climbed to its highest level since 1997. Interest-rate expectations also shifted. According to CME data, market pricing for the Fed’s year-end policy rate rose by about 3 basis points to 3.6%. FedWatch data showed that the probability of the Fed leaving rates unchanged at its April meeting slipped from 99% to 96%, while the chance of a 25-basis-point increase rose from 1% to 4%. Tim Waterer, chief market analyst at KCM Trade, said that once oil moves above $100, investors quickly start focusing on the possibility of rate hikes to contain inflation, and those expectations weaken gold’s performance.
The inflation backdrop has intensified this reaction. The US headline PCE inflation released last Friday came in stronger than expected, while core inflation remained relatively steady. The data reinforced the view that underlying price pressures remain sticky, even if they did not dramatically change immediate Fed expectations.
March CPI data had already shown annual inflation accelerating to 3.3%, the highest reading since May 2024, driven in part by energy costs. Markets are now pricing in a much lower probability of rate cuts by the end of the year than before the latest conflict escalated.
This creates a difficult environment for gold in the short run. Inflation usually supports bullion as a store of value, but if investors believe central banks will respond with tighter policy and higher real yields, gold can come under pressure instead. The renewed geopolitical shock hit broader financial markets as well. European stocks declined, with the pan-European Stoxx 600 down 0.8% on Monday as all major bourses fell and most sectors traded in negative territory, with oil and gas the main exception. Gold prices in other currencies also weakened early in the day. In euros, gold slipped back below €4,000 per ounce after setting a record high of that level three months ago. In sterling, prices fell below £3,500 per ounce. Both recovered more than half their losses by midday in London, mirroring the rebound in the dollar-denominated spot market. Meanwhile, consumer confidence data pointed to a more fragile economic backdrop. The University of Michigan’s consumer sentiment index plunged 10.7% in April to a record low, underscoring growing unease among households.
From a chart perspective, gold remains under pressure but not broken. The $4,800 area, which roughly aligns with the 50-day moving average, proved too strong to overcome last week, triggering the latest pullback from a high near $4,835. Technical support is seen around $4,576, while the next major upside resistance sits near $4,881. Momentum indicators remain mixed. MACD remains negative, and RSI has slipped into the low 40s, indicating ongoing corrective pressure. Since the latest Middle East tensions began, gold has lost more than 10% and remains around 15% below its all-time high of $5,595, reached on January 29.
Still, it is also up 16.5% from its low since the “Epic Fury” conflict began at the end of February and posted a second consecutive weekly gain last week. That contrast captures the tension in the market: weak near-term price action against a stronger underlying strategic bid.
Beneath the daily volatility, gold’s longer-term support structure appears intact. Major financial institutions are taking advantage of price weakness to increase their exposure. Union Bancaire Privée is reportedly raising gold allocations in discretionary portfolios from around 3% to about 6% through physically backed ETFs, with plans for further additions. The bank keeps a year-end target of $6,000 per ounce.
Other large institutions remain constructive as well. Goldman Sachs has a target around $5,400, while JPMorgan and Wells Fargo see potential for $6,300. State Street has identified a structural floor between $4,000 and $4,100. Central banks continue to reinforce gold’s strategic role in reserves. Global official institutions were net buyers of 27 tonnes in February, led by Poland’s 20-tonne purchase. Gold’s share of global foreign exchange reserves has now climbed to its highest level since 1991.
France has taken an especially notable step. Between July 2025 and January 2026, the Banque de France sold roughly 129 tonnes of older bars stored at the Federal Reserve in New York. It replaced them with newer LBMA-standard bars purchased in Europe for storage in Paris. The transaction generated a book profit of €12.8 billion and left France holding all 2,437 tonnes of its reserves domestically. Another 134 tonnes are expected to be upgraded by 2028. Hungary has also sharply expanded its reserves, increasing from around 3 tonnes in 2016 to about 110 tonnes today as part of a broader strategy to improve financial stability.
Exchange-traded fund flows indicate that investor behavior remains divided. US gold ETFs recorded record outflows of $12 billion in March, the largest monthly withdrawal on record. In contrast, Chinese gold ETFs have attracted strong buying, with year-to-date inflows reaching $8.1 billion as domestic investors bought the dip.
Globally, ETFs have begun to stabilize, with April inflows of around 20 tonnes so far after March’s large net outflow. Holdings in the SPDR Gold Trust, the world’s largest gold-backed ETF, were little changed on Friday at 1,052.42 metric tonnes, near the lowest level in about a week. Silver suffered a sharper decline than gold, underscoring how defensive gold’s rebound actually was. Silver prices fell nearly 4.5% in European trading on Monday to around $72.63 per ounce, after opening near $75.93. The metal had rallied 4.0% last week and was coming off a three-week high near $77.65, but the stronger dollar and renewed rate concerns triggered heavy profit-taking. Like gold, silver faced headwinds from rising oil prices, a firmer US dollar, and reduced expectations for monetary easing.
For now, gold is caught between short-term macro pressure and long-term strategic support. On the bearish side, surging oil, a stronger dollar, firmer bond yields, and rising Fed rate expectations all create near-term headwinds. If Brent crude stays above $100 and inflation fears keep building, gold may continue to struggle to break higher in the immediate future. On the supportive side, geopolitical risk remains elevated, central banks continue to buy, reserve diversification is accelerating, and institutional investors are using weakness to add exposure. The weakening inverse correlation with oil suggests gold is no longer responding as mechanically to energy shocks as it did earlier in the conflict. That may prove to be Monday’s most important signal. Gold did fall when the Hormuz threat hit, but it did not stay down. In a market defined by war risk, inflation anxiety, and policy uncertainty, that kind of resilience may matter more than the initial sell-off.