Gold Softens on Prospects of Fed Rate Hikes as Brent Tops $100

Gold prices fell Thursday, giving back a two-week high reached just a day earlier, as Brent crude broke above $100 a barrel for the first time in two months and sent Treasury yields and rate-hike expectations surging — a combination that has repeatedly proven toxic for the precious metal in recent weeks.

The Numbers

Spot gold slipped 2% to settle at $4,049.56 an ounce, while gold futures declined 2.4% to $4,052.40. The drop came after bullion had rallied roughly 3% over the prior two sessions, largely on technical buying after repeatedly testing the psychological $4,000 level the week before. The 10-year Treasury yield climbed to 4.707%, its highest level since January 2025, as Brent crude blew through $100 following renewed Houthi attacks on Saudi tankers in the Red Sea.

Why Rising Oil Is Hitting Gold

The mechanism at work is straightforward but powerful: rising oil prices intensify inflation fears, which push up Treasury yields and strengthen the dollar as markets price in a higher probability of Federal Reserve tightening. Both of those forces work directly against gold, since higher rates make non-yielding assets like bullion less attractive relative to interest-bearing alternatives, while a stronger dollar makes gold more expensive for buyers using other currencies.

Fed Odds Have Shifted Sharply

The scale of the shift in rate expectations this week has been notable. According to the CME FedWatch tool, the odds of the Fed holding rates steady at its July 29 meeting fell to about 66%, down from around 88% just a week earlier, while the odds of a quarter-point hike jumped to nearly 34% from around 12%. Separately, September hike odds specifically climbed to 80% from 68% just a day earlier, according to FXEmpire's tracking — a jump reinforced by jobless claims falling to 187,000, the strongest reading in 56 years, which removed one of the key arguments gold bulls needed the Fed to see a slowing economy.

The Meeting Isn't About July — It's About September

Markets widely expect the Fed to hold rates steady at next week's July 29 meeting; the real question is whether new Fed Chair Kevin Warsh's language on inflation confirms what the bond market has already begun pricing in for September. A hawkish statement on energy costs and inflation would likely keep the dollar firm, yields elevated, and gold under continued pressure — while a dovish surprise would require the Fed to look past $100 crude, a nearly 4.7% 10-year yield, and the strongest jobless claims reading in over five decades, a combination analysts describe as "a lot to look past."

Not Everyone Is Bearish

Despite the pullback, some analysts see reasons for continued longer-term support. ANZ analysts noted that investors have continued rebuilding gold positions even amid the prospect of elevated interest rates, suggesting recent weakness has attracted buyers rather than triggering fresh selling — non-commercial net long positions have climbed to their highest level since January, alongside renewed inflows into gold-backed exchange-traded funds. Separately, the People's Bank of China added 14.93 tonnes to its gold reserves in June, marking its 20th consecutive month of purchases and its largest single-month addition since 2023 — a sign of continued central-bank demand even as prices have pulled back roughly 28% from January's all-time high of $5,595.

Where Gold Stands Technically

Spot gold remains below the $4,023.35 pivot level that technical analysts are watching closely; a sustained move below $3,982.20 would keep bears in control of the chart, while a recovery above $4,023.35 would ease near-term downside pressure, with $4,065.83 and $4,245.20 as the next upside targets if bulls regain control.

What's Next

With the Fed's blackout period ahead of the July 29 meeting now in effect, traders have limited fresh commentary to parse in the immediate term, leaving oil prices and Treasury yields as the dominant near-term drivers for gold. Any further escalation in the Red Sea or broader Middle East conflict — or a surprise in how Chair Warsh frames inflation risk — could quickly shift the calculus in either direction.