Gold spot prices climbed back above $4,000 an ounce on Thursday, snapping a slide that had taken the metal to its lowest level since November 2025. The catalyst was straightforward: a PCE inflation print that came in line with expectations, softening the dollar enough to give bullion room to breathe. But the rally ran into a ceiling almost immediately, as a fresh attack on a cargo vessel in the Strait of Hormuz sent oil prices higher and reminded markets that the geopolitical backdrop remains volatile and unresolved.

Gold’s rebound off multi-month lows is real, but it is hemmed in on both sides: softer-than-feared inflation data eases rate-hike pressure, while a renewed Hormuz incident threatens to reignite the oil shock that pushed core PCE to its highest reading since October 2023. For metals investors, the setup is a tug-of-war between monetary relief and geopolitical risk premium.

Spot gold gained 0.7% to settle at $4,026.78 per ounce, while gold futures rose 0.8% to $4,041.60, Investing.com reported. The bounce came after a punishing stretch for the metal, which had been pressured by a hawkish Federal Reserve under new chair Kevin Warsh and a strengthening dollar. The reversal, while welcome for gold holders, left plenty of questions unanswered about what comes next.

PCE Data: In Line, but Not Comforting

The May PCE report gave gold just enough room to rally. Core PCE rose 0.3% month-over-month and 3.4% year-over-year, matching consensus estimates. Headline PCE increased 0.4% month-over-month and 4.1% year-over-year, slightly below the 0.5% monthly estimate Wall Street had penciled in. Both readings ticked up from April.

Related Posts
Gold steadies as strong jobs data lift Fed hike odds

None of this is good news in absolute terms. The 4.1% headline figure is the highest since April 2023. Core PCE at 3.4% year-over-year is the hottest since October 2023. Both sit well above the Fed’s 2% target. But markets were braced for worse, and the in-line print was enough to ease the dollar and trim some of the rate-hike bets that had been building.

CME FedWatch data showed a marginal easing in bets for Fed rate hikes and a slight uptick in bets for holding rates steady. That shift, modest as it was, loosened the dollar’s grip on gold just enough to let the metal reclaim a psychologically important level.

Some on Wall Street believe the May PCE reading may represent a peak in the inflationary impulse from the Strait of Hormuz closure and the broader supply disruption. Whether that view holds depends entirely on what happens next in the waterway and whether oil prices stabilize or spike again.

The Hormuz Problem Isn’t Over

The optimism embedded in that “peak inflation” thesis took a hit on Thursday. The United Kingdom Maritime Trade Operations reported receiving notice of an attack on a cargo vessel in the Strait of Hormuz near Oman. An unknown projectile struck the vessel’s bridge. No casualties were reported, but the damage was real and the timing was terrible.

Two senior U.S. officials confirmed to the Wall Street Journal that the vessel was a Singapore-flagged cargo ship and attributed the attack to Iran’s Islamic Revolutionary Guard Corps. The incident came just days after President Trump signed an interim peace deal with Iran that was supposed to end fighting on all fronts and reopen the strait.

That deal had already begun to show results. Kpler data showed confirmed tanker crossings through the Strait of Hormuz doubled to 70 on Wednesday from the previous day. Brent crude futures had pulled back from their peaks, falling to levels last seen just before the start of the Middle East conflict. The attack threatens to reverse that progress.

The strait carries roughly a fifth of the world’s oil and gas. Its effective closure since the start of a U.S.-Israeli joint assault on Iran at the end of February created what the source described as a massive supply disruption. The interim peace deal was meant to be the off-ramp. Thursday’s attack suggests the IRGC may not be fully on board with that timeline, and the diplomatic setback is already feeding back into oil prices and, by extension, into inflation expectations.

For gold, this creates a paradox. Higher oil prices feed inflation, which in theory should support gold as a store of value. But if that same inflation forces the Fed into more aggressive tightening, the dollar strengthens and real yields rise, both of which tend to weigh on bullion. The recent hammering of gold and silver on rate-hike fears showed exactly how that dynamic can play out.

The Fed’s Hawkish Lean

The backdrop for all of this is a Federal Reserve that has shifted meaningfully toward tightening. Under Kevin Warsh, the Fed’s updated dot plot showed at least half of FOMC policymakers anticipating rate hikes this year. That was more hawkish than markets expected, and it had been the primary weight on gold in the weeks leading up to Thursday’s rebound.

JPMorgan analysts led by Alex Gallin framed the situation in terms that metals investors should take seriously:

“The closure of the Strait of Hormuz nudged global central banks in a more hawkish direction as oil prices surged. Near-term pressures should moderate with the surprisingly quick drop in oil prices.”

That was the hopeful part. The less hopeful part followed:

“However, growth risks are skewed to the upside amidst elevated core inflation and constrained labor supply. Medium-term pressures are thus in the direction of a more substantial tightening than the shallow adjustment we and markets project. An unexpected shift towards higher interest rates is a development often associated with financial stress.”

That last sentence deserves attention. JPMorgan is not predicting a crisis, but the bank is flagging that the path from “shallow adjustment” to “more substantial tightening” runs through territory where things can break. Goldman Sachs recently slashed its gold forecast by $500 on similar logic, betting that rate-hike risk would overwhelm safe-haven demand. Thursday’s price action suggests that trade is getting crowded.

What Gold Investors Are Weighing

The forces pulling on gold right now are not easily resolved into a clean directional call. Consider the competing inputs:

  • Dollar weakness from softer PCE: Supportive for gold, but only if the data continues to come in at or below expectations.
  • Hormuz instability: Supports gold as a safe-haven bid, but also feeds the oil-driven inflation that could force more aggressive Fed tightening.
  • Hawkish Fed posture: Negative for gold through higher real yields and a stronger dollar, but potentially positive if tightening triggers financial stress or recession risk.
  • Diplomatic fragility: The interim peace deal is days old and already under strain. If it collapses, the supply disruption resumes and the entire macro picture shifts.

The fact that gold bounced from November 2025 lows rather than breaking down further is worth noting. Gold’s recent 23% plunge looked brutal, but the metal has a long history of sharp drawdowns within secular bull markets. The question is whether the current rebound has legs or is simply a dead-cat bounce before the next leg of Fed-driven selling.

For readers watching equity valuations alongside metals, the broader context matters. When stocks are priced for perfection and the macro environment is deteriorating, capital tends to rotate toward assets with fewer counterparty risks. The S&P 500’s elevated CAPE ratio makes that rotation logic more relevant, not less, even as gold faces its own headwinds from rising rates.

The Real Yield Trap

The mechanism that matters most for gold over the medium term is real yields. When the Fed hikes into an economy already dealing with supply-side inflation, real yields can rise sharply. That is typically toxic for gold, which offers no yield and competes directly with Treasuries for capital-preservation flows.

But there is a second-order effect that JPMorgan’s Gallin is hinting at. If tightening overshoots, credit stress follows. And when credit stress arrives, the flight to safety overwhelms the yield differential. Gold’s worst enemy is a smooth, controlled tightening cycle. Its best friend is a tightening cycle that breaks something.

The current setup sits uncomfortably between those two scenarios. Inflation is too high for the Fed to ease. The geopolitical backdrop is too unstable for markets to price in a clean resolution. And the labor market, per JPMorgan, remains constrained enough to keep wage pressure elevated. That is a recipe for policy error in either direction.

Investors watching labor market disruption more broadly, including the potential for AI-driven layoffs to reshape employment, should consider how demand destruction could eventually flip the inflation narrative entirely. Deflation risk does not feel imminent, but it is never priced until it arrives.

Where This Leaves the Metal

Gold above $4,000 is not the same as gold in a confirmed uptrend. Thursday’s move was a relief rally driven by a single data point, immediately complicated by a geopolitical shock that could easily reverse the conditions that produced it. If the Hormuz situation escalates, oil spikes, and the Fed tightens further, gold could retest its lows. If the peace deal holds and inflation moderates, the dollar may ease enough to give gold a more durable bid.

The honest answer is that neither outcome is assured. What is clear is that the macro environment is unusually hostile to assets that depend on stability. Gold does not need stability. It needs uncertainty, policy tension, and a loss of confidence in the system’s ability to manage outcomes smoothly.

On that score, Thursday delivered plenty of raw material.