Hormuz Negotiation Progress Lowers Rate Hike Expectations, Gold Trades in Narrow Range
Claire Weston
Progress in Strait of Hormuz reopening talks has dragged oil prices down for a third day, cooling inflation expectations and narrowing Fed rate-hike bets from two to one, with spot gold hovering near $4,069 an ounce.
How far has gold slipped — and what about other metals?
Spot gold traded at $4,069.41 an ounce as of 7:45 a.m. Singapore time on August 5, down 0.2% after gaining 0.6% the previous session.
Silver fell 0.2% to $59.43 an ounce. Platinum and palladium were broadly flat.
The Bloomberg Dollar Spot Index held steady after dipping 0.1% the prior day. This means → the gold pullback is not dollar-driven — it is mainly about cooling inflation expectations.
How did the Hormuz talks change rate-hike expectations?
Qatar confirmed that all parties have begun drafting a text for an interim proposal. Officials from both the U.S. and Iran expressed optimism.
The chain: talks progress → oil falls for a third day → inflation expectations cool → rate-hike pricing narrows. In plain terms = a potential reopening of a key oil-shipping chokepoint pulls crude lower, easing price pressures and removing one argument for the Fed to hike.
Just last week, markets priced in two rate hikes this year. Now the pricing has fully shifted to just one.
Where does the Fed itself stand on hiking?
The Fed held rates steady for a fifth straight meeting last week, but three officials voted in favor of a hike — a visible internal split.
Philadelphia Fed President Anna Paulson said she remains "open-minded" on the policy path, citing conflicting signals on whether current policy is restrictive enough.
This means → even as market expectations narrow, the Fed has not shut the door on hiking. Three dissenting votes show the hawkish camp still has weight.
Why is gold so sensitive to rate-hike expectations?
MKS Pamp head of research and metals strategy Nicky Shiels wrote: "Gold is the macro system's liquidity sponge — any whiff of rate-hike risk, structural or headline, hits gold first."
In plain terms = higher rates raise the payoff on cash and bonds. Gold earns no interest, so its holding cost rises — and money leaves gold before anything else.
Since the U.S.–Iran war broke out in late February, gold has fallen more than a fifth — squeezed by surging energy prices, rising inflation, and expectations of rates staying higher for longer.
What role is Chinese buying playing?
According to Bloomberg data, Chinese gold ETFs recorded net inflows for 14 consecutive trading days through Monday — the longest streak since March 2026.
This reflects a sentiment shift in the world's largest gold market. Sustained institutional buying has helped gold hold the $4,000-an-ounce floor.
Whether Chinese demand can keep offsetting rate-hike pressure depends on whether a Hormuz deal ultimately lands — still the pivotal variable for oil prices, inflation expectations, and the Fed's policy path.
Content is for reference only, not financial advice.