Down more than 2% to $4,020 on Monday, its second straight losing day. Normally a war getting worse means gold goes up. Not this time.
The reason's pretty specific: the US-Iran exchange has pushed oil higher, and traders read higher oil as higher inflation — which means the Fed holds rates higher for longer. The 10-year Treasury yield backed that up, climbing to 4.59%, its highest in almost two months. Markets are now pricing in somewhere between a 51% and 71% chance of a Fed rate hike by September, depending on which desk you ask. Fed Chair Kevin Warsh testifies before Congress this week, and everyone's waiting to see if he leans into that.
So the mechanism is simple once you see it: gold doesn't earn yield, bonds do. When yields climb this fast, gold becomes the thing you sell to buy the thing that pays you.