$107 Brent Oil & Gold’s 13% Decline Drive Shift Toward Cash-Generating Equities

• The US dollar gained 1.2% this week while 10-year Treasury yields rose 6 basis points to 4.518%, tightening financial conditions and increasing the return available from US assets. Higher Treasury yields and a stronger dollar increase the opportunity cost of holding gold, silver, and low-yield currencies because investors can earn more from US dollar assets. 
• Spot gold has fallen 13% since the US-Iran conflict began on February 28, reaching $4,619.61, its lowest level since May 6, as 10-year Treasury yields at 4.518% make income-generating bonds more attractive than gold. 
• ANZ cut its year-end gold target by $200 to $5,600, while UOB senior economist Alvin Liew raised the bank’s 2026 US inflation forecast, reducing the likelihood of Fed rate cuts before 2027.
• Investors cannot reliably position for a dollar reversal or precious metals rebound because the Trump-Xi summit could produce either a diplomatic breakthrough or no progress, leaving no clear entry signal for either trade.
• This outlook breaks down if Trump and Xi secure an immediate reopening of the Strait of Hormuz, which would likely push oil prices lower, reduce inflation pressure on Treasury yields, and trigger a rebound in gold, silver, and weakened currencies.

Oil-Driven Inflation & 4.518% Treasury Yields Pressure Gold Prices and Precious Metals

The US dollar index gained 1.2% this week while 10-year US Treasury yields rose 6 basis points to 4.518%, tightening financial conditions and increasing demand for US dollar assets. Spot gold fell 0.6% to $4,619.61 per ounce, extending its weekly loss to 2% as higher Treasury yields increased the opportunity cost of holding gold.

Gold has fallen 13% since February 28 as rising oil prices and Treasury yields reduced demand for non-yielding assets. Oil-driven inflation pushed 10-year Treasury yields to 4.518%, making income-generating bonds more attractive than gold.

Hormuz Disruptions & Prolonged Iran Talks Push Brent Crude Above $107

Brent crude prices are driving the inflation and rate pressure behind the selloff in gold. Brent crude futures surged 5.7% to $107 a barrel after attacks and vessel seizures in the Strait of Hormuz disrupted shipping routes. Oil above $100 raises manufacturing and shipping costs across the global economy, pushing consumer prices higher and reducing the likelihood of Fed rate cuts. 

Oil prices remain elevated because negotiations over the Strait of Hormuz have not produced a shipping agreement. US President Donald Trump warned that his patience with Iran is running out while talks with Chinese President Xi Jinping continue, signaling continued risk to Gulf shipping routes. Without a verified reopening of Gulf shipping lanes, oil above $100 per barrel remains the most likely outcome, keeping inflation elevated, delaying Fed rate cuts, and supporting the US dollar against gold, silver, and low-yield currencies.

Fed Rate Cuts Delay & ANZ’s $5,600 Target Pressure Gold Prices

Even if a ceasefire is reached, higher oil prices have already raised manufacturing and shipping costs across the global economy. Alvin Liew, senior economist at UOB, raised the bank’s 2026 US inflation forecast, said risks remain “biased towards the upside,” and warned the Fed may delay rate cuts until 2027.

ANZ cut its year-end gold target by $200 to $5,600, citing higher Treasury yields and a stronger US dollar as the main pressure on gold prices. Gold is unlikely to recover unless Gulf shipping lanes reopen and Brent crude falls below $100 per barrel, reducing inflation pressure on Treasury yields and the US dollar. 

CME FedWatch probabilities show how markets are pricing future Fed rate decisions. The probability of a December 2026 Fed rate hike rose to 40% from 22.5% a week earlier, signaling markets expect inflation to remain above the Fed’s 2% target and Treasury yields to stay high enough to pressure gold prices. 

Higher Treasury Yields Pressure Silver & Major Currencies While Favoring Free-Cash-Flow Equities

Rising US yields are pressuring assets that do not generate income, including precious metals and low-yield currencies. Spot silver fell 2.5% to $81.41 per ounce while the Japanese yen remained below 158 per dollar as higher US yields continued to support the dollar. Sterling fell to a one-month low after UK health minister Wes Streeting resigned, with Henry Cook, senior Europe economist at MUFG Bank, warning the British economic outlook is “firmly skewed to the downside”.

Padhraic Garvey, ING’s regional head of research for the Americas, said that persistent inflation is likely to push Treasury yields higher. That favors companies with strong free cash flow and pricing power over highly leveraged businesses that depend on lower interest rates to manage debt costs. 

Because the Trump-Xi summit could end with either a shipping agreement or no progress, buying falling precious metals or positioning for a weaker US dollar remains a speculative trade without a clear entry signal. Investors should reduce leverage and reassess positions that depend on Fed rate cuts before 2027, which UOB’s Alvin Liew does not expect.

Hormuz Reopening & Fed Rate Hike Odds Below 40% Signal Rebound in Gold and Currencies

This outlook remains valid while disruption in the Strait of Hormuz keeps Brent crude above $100 per barrel and US inflation above the Fed’s 2% target, supporting a strong US dollar, gold below $4,700, and a 40% probability of a December 2026 Fed rate hike.

This outlook would change if Trump and Xi announce a verified reopening of Gulf shipping lanes. Lower oil prices would reduce inflation pressure on US Treasury yields, weaken the US dollar, and likely trigger a relief rally in gold, silver, the yen, and sterling. 

A decline in the 40% probability of a December 2026 Fed rate hike, driven by weaker US labor data or progress at the Trump-Xi summit, would signal lower Treasury yields and improve the outlook for gold and silver.