Fed Hike Bets Hit 70%: Gold Just Lost The Argument to a 5.2% Treasury

Gold has spent 2026 living through a war in the Gulf, an oil shock and inflation stuck above 3%. That should have been ideal for a hedge against inflation and disorder. Instead, the metal trades roughly 25% below its January peak. The reason is a number the bond market last printed in 2007.

22%, the highest since June 2007. 3%. 10 an ounce on Monday, its lowest close since early August. 70.

So why is gold falling at a time when inflation fears are running high? Oil Is The Link Between Hormuz And The Fed The chain starts in the Strait of Hormuz. Over the weekend, President Donald Trump rejected Iran’s proposal to reopen the waterway within seven days. 89 a barrel on Monday.

After that, the steps follow in order. Higher oil lifts inflation. Higher inflation pushes the Fed toward more hikes. More hikes push Treasury yields up.

Higher yields make gold, which pays no interest, less attractive. “The high bond yields and high oil price tandem continues to act as a thorn in gold’s side,” Tim Waterer, chief market analyst at KCM Trade said on Monday. He added that the week’s data could make things worse. “Stronger-than-expected inflation or employment numbers could keep upward pressure on bond yields and weigh further on gold,” Waterer said.

S. hikes. He warned they could keep real interest rates and the dollar elevated and raise the cost of holding gold. Read Also: Economy Grows 63% in Six Years, 30-Year Treasury Lost Almost As Much Real Yields Are Doing The Damage The yield that matters most for gold is the real one.

A real yield is what a bond pays after expected inflation. 87% on Monday. 9% a year above inflation. Every rise in real yields makes the gold position more expensive to hold.

“It’s real rates that have moved up more than the inflation expectations,” Cleveland Fed President Beth Hammack said on Friday. For gold, that is the harder case. If the rise in yields were driven by fear of inflation, gold could hold up as an inflation hedge. When real rates are doing the rising, gold usually has no offset.

Adam Button, head of currency strategy at investingLive, saw the link play out in real time last week. “You saw the clear correlation when it broke at five percent again,” he said in Kitco’s weekly survey. “It shot higher; gold went down. ” ING’s economists said Monday that October hike pricing stood at 16 basis points, or about 64% of a full quarter-point move.

“Upside surprises in jobs data could take rate hike pricing for the October FOMC above 20bp,” they wrote. August PCE inflation arrives Wednesday. 3% in the 12 months through July. September payrolls follow on Friday.

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