Gold Holds Above $2,390 as Iran Strait Progress Eases Inflation
0h ago|4 min readStandard
Fazen Markets Editorial Desk
Collective editorial team · methodology
goldxau-usd
Fazen Markets Editorial Desk
Collective editorial team · methodology
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Gold held its recent gains in early Asian trading on May 26, maintaining a level above $2,390 per troy ounce. The price action followed reports that the United States and Iran are making tangible progress toward a diplomatic agreement to reopen the Strait of Hormuz and restore unrestricted global oil flows. The development, noted in financial markets intelligence on May 25, directly alleviates one of the primary near-term catalysts for oil-driven inflation. The price of gold settled at $2,392, representing a net weekly gain of approximately 1.7%.
The Strait of Hormuz is the world's most critical oil transit chokepoint, with about 20% of global seaborne crude oil passing through its narrow passage. A sustained closure would remove 18 to 21 million barrels per day from global supply. The last major supply shock from the region occurred in September 2019, when attacks on Saudi Aramco facilities briefly removed 5.7 million barrels per day. That incident spiked Brent crude by 20% in a single session and directly fed into a 4% monthly gain for gold as a traditional inflation hedge.
The current macro backdrop features stubbornly elevated central bank policy rates. The Federal Reserve's main policy rate stands at 4.75% to 5.00%, while the European Central Bank maintains a 3.75% deposit facility rate. High rates typically pressure non-yielding assets like gold by increasing the opportunity cost of holding them. Persistent geopolitical tensions in the Middle East had provided a countervailing support for gold, offsetting this rate-driven headwind.
The catalyst for the price move is a reported shift in diplomatic posturing. Sources indicate the framework of a potential US-Iran deal involves lifting certain secondary sanctions in exchange for Iran guaranteeing safe passage for oil tankers and halting attacks on shipping. Progress had been stalled for months over nuclear inspection protocols and the scope of sanctions relief. A breakthrough now directly targets the physical supply of oil, rather than financial or nuclear constraints.
Gold futures for June delivery settled at $2,392.30 per ounce on the COMEX, up $40.50 from the prior week's close of $2,351.80. The spot price of gold traded in a tight $2,388 to $2,397 range following the news. The 10-year US Treasury yield, a key benchmark for global borrowing costs, fell 4 basis points to 4.28% as inflation expectations cooled.
| Asset | Price Pre-News (Approx.) | Price Post-News (May 25 Close) | Change |
|---|---|---|---|
| Gold (XAU/USD) | $2,351 | $2,392 | +1.74% |
| Brent Crude Oil | $84.70 | $82.15 | -3.0% |
| US 10-Year Yield | 4.32% | 4.28% | -4 bps |
The gold-to-oil ratio, a measure of how many barrels of oil one ounce of gold can buy, rose from 27.7 to 29.1. This indicates gold outperformed oil as the geopolitical premium rapidly unwound. The S&P GSCI commodity index fell 1.2%, underperforming gold's stability. Other precious metals showed mixed reactions; silver fell 0.8% to $31.20, while platinum gained 0.5% to $1,045.
The immediate second-order effect is a sector rotation out of pure inflation hedges and into rate-sensitive assets. Energy sector equities, particularly integrated oil majors with high exposure to Middle East logistics, face headwinds. Tickers like BP and TOT may see pressure if the oil price decline is sustained, potentially trimming 2-3% from their valuations. Conversely, transport and industrial sectors stand to benefit from lower input costs. Airlines such as DAL and shipping companies like MATX could see a 1-2% relief rally.
A key limitation to a sustained gold sell-off is the unchanged fundamental rate environment. The Fed has not signaled an imminent rate cut, keeping the opportunity cost of holding gold elevated. The progress on the Strait is a supply-side inflation fix, but persistent service-sector and wage-driven inflation remain untouched by this development. This provides a floor for gold prices.
Positioning data from the Commodity Futures Trading Commission shows speculative net longs in gold futures remain near a three-year high. The flow following this news is likely a reduction in these tactical long positions, not a structural shift to net short. Physical gold ETFs like GLD may see minor outflows, while capital is likely rotating into Treasury Inflation-Protected Securities (TIPS) and long-duration growth equities as the inflation scare moderates.
The next specific catalyst is the OPEC+ meeting scheduled for June 1, 2026. The cartel's production decision will signal whether it views the potential Strait reopening as a durable supply addition or a temporary reprieve. Market participants will also watch the US Personal Consumption Expenditures price index data for May, due for release on June 27. This is the Fed's preferred inflation gauge and will test the narrative of easing price pressures.
For gold, technical levels are critical. Immediate support rests at the 50-day moving average near $2,350. A break below $2,320 would signal a failure of the recent bullish structure. Resistance is firm at the late-April high of $2,420. A sustained move above that level would require a catalyst beyond geopolitics, such as a concrete shift in Fed forward guidance toward rate cuts.
The 10-year US Treasury yield breaking decisively below 4.25% would reinforce the disinflation trade and could support gold by reviving expectations for eventual monetary easing. Conversely, a rebound in oil prices back above $84 per barrel would reignite inflation fears and likely prompt a swift reversal into gold.
For retail investors, the primary implication is a reduced near-term need for direct inflation hedges in portfolios. Allocations to broad commodity ETFs like DBC or gold miners like GDX may underperform if the oil price decline holds. The development favors a shift toward sectors benefiting from lower energy costs, such as consumer discretionary and industrials. Retail investors should review their asset allocation to ensure it aligns with a potentially moderating inflation trajectory, rather than chasing last month's geopolitical scare.
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