Gold: Why the Yellow Metal Stalls at $4,332 Despite the Iran-Israel Truce

An Unfavorable Bet with the Prospect of a More Restrictive Fed

The implied probability of a Fed rate hike by December now exceeds 70%, according to the CME FedWatch. This level of anticipation profoundly alters the equation for gold: the more U.S. real yields are expected to rise, the higher the opportunity cost of holding an asset that doesn't pay a coupon becomes.

The upcoming release of the U.S. Consumer Price Index for May will be an important test to confirm or invalidate this path. Meanwhile, the dollar remains strong, at its highest level in over two months.

This combination (a strong greenback and rising long-term rates) could, at least partly, explain why gold has not been able to fully capitalize on the situation, unlike historical patterns observed during previous periods of tension in the Middle East.

A geopolitical premium focused more on oil than on gold

Brent crude is trading around $92 a barrel after experiencing a surge of about 5% during the latest exchange of missiles between Iran and Israel. Approximately 20% of the world's daily fuel needs pass through the Strait of Hormuz, and its de facto closure along with persistent tensions in the Red Sea maintain a significant risk premium on oil.

This shift of geopolitical risk towards hydrocarbons, rather than precious metals, reflects the physical nature of the current shock: it is the global energy supply directly threatened by the risk of maritime blockade, not the overall financial liquidity. In this scenario, gold captures only a limited portion of the hedging flow.

However, the ceasefire remains fragile, and any resumption of hostilities could very quickly alter the trajectory of oil prices, currencies, and sovereign rates.

Central Banks Caught Between Energy Shock and Inflationary Pressures

Eurozone inflation reached 3.2% year-on-year in May (HICP), according to Eurostat data, increasing the likelihood of another interest rate hike by the ECB at its June meeting. The transmission of the oil shock to overall and core inflation brings the issue of monetary tightening back to the forefront in Europe.

In Japan, the yield on the 10-year JGB stands at 2.7%, its highest since late May according to Reuters, reflecting both the anticipated rate hikes by the Bank of Japan and fears of imported inflation via the energy shock. The partial synchronization of the three major central banks (Fed, ECB, BoJ) on a restrictive bias creates an unusual environment for zero-yield safe-haven assets.

Regarding global trade, China reported foreign trade of 4,450 billion yuan in May (+16.9% year-on-year), with exports up 13.8% and imports up 21.5%, according to the General Administration of Customs. These figures, which should be interpreted cautiously due to possible base effects and the redirection of shipping flows under geopolitical constraints, suggest resilience in trade despite disruptions between the Gulf, the Red Sea, and Europe.