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A Reuters report detailed that spot gold fell 2.1 percent to $4,043.14 an ounce by mid-afternoon trading in New York on Thursday after touching a two-week high in the prior session. Brent crude climbed above $100 a barrel for the first time since late May as Yemen’s Houthis claimed responsibility for strikes on two Saudi oil tankers in the Red Sea, raising fears of wider supply disruptions through key maritime routes. The combination has shifted market focus toward persistent price pressures that could limit the Federal Reserve’s ability to ease policy.
Higher oil costs are lifting bond yields on expectations that central banks must maintain elevated interest rates to contain inflation, according to commodity analysts monitoring the session. Jim Wyckoff, a market analyst at American Gold Exchange, said the higher crude oil prices are pushing up bond yields on the notions that central banks will not be able to lower their interest rates because of problematic inflation. He added that rising bond yields are the enemy of gold and silver market bulls because gold and silver carry no yield.
Cleveland Fed President Beth Hammack added her voice to a growing chorus of policymakers arguing interest rates may need to rise to beat back persistent inflation, a move reported in assessments of the Federal Open Market Committee outlook. Futures markets now place an 83 percent probability on a U.S. rate hike at the September meeting, up from previous levels as energy-driven cost increases reshape forecasts. The developments set the stage for potentially charged discussions at the central bank’s next gathering under Chairman Kevin Warsh.
Gold has retreated despite its historical role as an inflation hedge, with the non-yielding metal losing appeal against a backdrop of stronger dollar demand from energy-importing economies, Bloomberg compilations of trading data show. The precious metal had advanced earlier in 2026 on bets for policy easing before the latest geopolitical flare-up reversed that momentum and triggered a pullback exceeding 2 percent in a single session. Speculative investors have reduced positions in response to the shifting rate outlook.
The escalation in Middle East tensions extends beyond initial conflict zones and threatens global oil flows, according to energy market updates that link the tanker incidents to potential chokepoints in the Strait of Hormuz. Such risks have driven Brent prices higher and compounded inflationary signals that Federal Reserve officials are weighing in their projections for the remainder of the year. Additional context from trading platforms indicates that oil’s advance to triple-digit levels has directly weighed on gold by reinforcing bets on higher-for-longer borrowing costs.
Traders continue to monitor incoming economic indicators for further clues on the trajectory of U.S. monetary policy, with the latest oil price spike adding a layer of complexity to inflation readings expected in coming weeks. The current environment echoes patterns seen in prior periods of energy market volatility that altered central bank paths, though specific outcomes will depend on the duration of the supply threats. Market assessments place the recent gold correction as part of a broader adjustment that has seen prices fluctuate amid competing influences from geopolitics and policy expectations.
