Bond prices plunged, expectations of interest rate hikes increased, but gold did not further decline? The market struggles to balance between inflation and recession.

Due to lack of progress in the reopening of the Strait of Hormuz, escalating concerns over inflation continue to cause a sharp drop in the bond market, with gold maintaining its downward trend. The price of gold fell by 1.3% at one point, then recovered most of the lost ground, rising to around $4,535 per ounce, after gold fell nearly 4% the previous week. There remains a significant divergence between the United States and Iran in reaching an agreement to end the weeks-long conflict and reopen the Strait of Hormuz (an important energy transport route that is currently effectively closed). On Monday, after US President Trump reiterated the threat against Iran, oil prices rose, increasing the possibility of a rate hike, which would put pressure on non-yielding gold. Since the initial sharp decline at the beginning of the conflict, precious metal prices have been fluctuating within a relatively narrow range, as investors assess the risks of inflation that could lead to higher interest rates, and concerns over economic growth that may be eased by ongoing conflict. Since the conflict erupted, the price of gold has fallen by about 14%. Last Sunday, a drone attack on a nuclear power plant in the UAE sparked a fire, highlighting the risks of a fragile ceasefire in the Middle East. As people become increasingly concerned that the inflation surge caused by the war will force major central banks to raise interest rates, the global bond market has plummeted. This sharp drop led to a spike in yields, as doubts grew over whether Middle East oil supplies could return to normal quickly. Daniel Hynes, Senior Commodity Strategist at ANZ Group Holdings Limited, pointed out in a report that as yields rise, "the risk-return profile of gold deteriorates, prompting investors to close positions." However, they expect that major central banks will eventually turn to loose monetary policy out of concerns for economic growth, which will support gold prices. The institution predicts that by mid-2027, the price of gold will rise to $6,000 per ounce. Due to the impact of tightened import policies, gold demand in India has been affected, but strong demand in China may offset this impact. Due to traders dealing with higher tariffs, gold imports in India have plummeted to record lows. Over the weekend, India further tightened silver import regulations to defend its currency, and the Indian rupee has now fallen to historic lows. Meanwhile, traders will closely watch the minutes of the April meeting of the Federal Reserve this week for clues on the future direction of interest rates. As of the time of writing, spot gold fell by 0.1% to $4,536.26 per ounce. Silver fell by 0.8% to $75.22 per ounce, with a cumulative decline of over 5% the previous week. The US dollar index rose by 0.1%, with a cumulative increase of 1.2% the previous week.