Gold has held near $4,000 an ounce even as fighting in the Middle East cut tanker traffic through the Strait of Hormuz to virtually zero, leaving the metal down roughly a fifth since the strikes on Iran began in late February. Higher oil prices lifted inflation and interest rate expectations, pressuring bullion, while China's central bank has stepped up its buying into the decline.
Gold is supposed to rally when wars break out and tankers stop moving, Frank Holmes wrote — but gold has been falling instead. The metal has stayed near $4,000 an ounce, down roughly a fifth since the strikes on Iran began in late February and well off its January record near $5,600.
The reason is not a mystery, according to Holmes: oil prices have increased, pushing up inflation and interest rate expectations, and gold has been pressured as a result. Brent crude crossed above $100 a barrel last week, after transits through the Persian Gulf bottleneck fell from some 80 vessels on a good day before the war to a recent high of 25.
The 10-year yield hits 4.71%
The U.S. 10-year yield touched 4.71% last week, its highest level since January 2025. German bunds hit levels not seen since 2011.
Both the Federal Reserve and the Bank of England meet this week, and both are expected to hold rates steady while flagging the risk of hikes down the road. Holmes has argued for years that the single most important variable for the gold price is the real interest rate, because when real rates climb the metal has tended to struggle — unlike fixed income, it does not bear interest.
China buys into the weakness
The People's Bank of China bought 15 tonnes of gold in June, its largest single-month purchase since October 2023, taking official holdings to 2,346 tonnes. That is 20 consecutive months of accumulation, the longest streak on record, according to the World Gold Council.
Its rate of accumulation has accelerated as the price has fallen. China added 40 tonnes in the first half, during which gold lost close to 30% of its value from its all-time high in late January. Analysts at hedge fund Zweig-DiMenna calculate roughly $5.7 billion of Chinese purchases in H1, most of it in the second quarter, against about $2 billion in all of 2025.
John Paulson, who made billions shorting the subprime mortgage market in 2007, told CNBC last week that he believes we are still in the early innings of a long-term gold rally: "As people lose faith in paper currencies, gold as an alternative will continue to grow".
Miners keep wide margins at $4,000
Gold has averaged roughly $4,700 an ounce so far in 2026 against all-in sustaining costs of below $2,000, a margin showing up as free cash flow, net cash balance sheets and buybacks. Newmont reported record free cash flow of $2.2 billion in the second quarter after producing some 1.3 million ounces, and announced a $0.26-per-share dividend.
Newmont and Barrick, which is scheduled to report next month, are expected to post combined second-quarter profits of around $3.5 billion.
Source: Investing.com
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