Gold 'Under Pressure' from Oil and Dollar as Hormuz Stays Shut

GOLD ROSE but silver prices struggled to hold onto an overnight rally in London on Tuesday as the world's central bullion trading hub returned from the UK's long May Day holiday weekend to find interest rates sharply higher in the bond market following fresh US-Iran fighting in the Strait of Hormuz.

Gold rose over $70 per Troy ounce from a new 5-week low near $4500, while silver prices also continued to trade lower for the week so far after dropping 75 cents from a spike above $74.

"Interest Rates too high!" tweeted US President Trump above an AI-made image of Federal Reserve chief Jerome Powell falling into a dumpster, and saying that the Fed chair "is a DISASTER for America!"

Regular grade gasoline at US gas stations today costs $4.48 per gallon on average according to data from non-profit drivers association the AAA, rising by almost a half from the eve of the US-Israeli war on Iran and now barely 50 cents below the all-time high of June 2022.

Diesel now costs $5.66 on average, barely 15 cents below its record high of 4 years ago.

"Strong oil prices and continued hawkish rhetoric from central banks are keeping gold under pressure," says Fawad Razaqzada, market analyst at spread-betting platform Forex.com.

"If oil continues to grind higher, the Dollar should stay supported, particularly against currencies from energy-importing regions such as the Eurozone. In that environment, gold is likely to remain under pressure."

With traders agreeing that crude oil is strangling gold, the Dollar rallied further against other major rich-world currencies on Tuesday, recovering 1/3rd of last Thursday's Bank-of-Japan-intervention plunge versus the Japanese Yen.

The Dollar also gained 0.3 cents against the Euro after President Trump declared that he's raising US import tariffs on European automobiles from 15% to 25%, citing un-named breaches of last summer's trade deal with the EU and also lambasting the US courts for forcing the US Customs and Border Protection agency to start refunding up to $166 billion of collections now deemed illegal under his 2025 tariffs campaign.

So-called 'commodity currency' the Aussie Dollar rose towards 4-year highs, however, after the Reserve Bank hiked its main interest rate for the 3rd meeting in a row, while Canada posted data showing its first trade surplus in 6 months thanks to the strong price of oil as well as gold exports.

Crude oil meanwhile edged back from Monday's new 4-year highs while Western stock markets rallied from yesterday's drop.

But the UK's FTSE All Share played catch up, falling 1.3% towards last week's 1-month low as UK government bond prices also fell.

"Politics is not background noise. In today's [UK bond] gilt market, it is a fundamental part of the investment signal," says bonds director Luke Hickmore at $740 billion asset managers Aberdeen of this week's UK local and regional elections, widely expected to hit the ruling Labour Party hard.

"Right now, the ceasefire holds," said US Secretary of War Pete Hegseth meantime of the US-Iran conflict, calling yesterday's attempt by the US Navy to escort 2 commercial tankers through the Strait of Hormuz "a separate and distinct project" now codenamed Project Freedom.

"The litany of worries that are driving gold higher may eventually need to become the base case to sustain this bull run through 2026," says analysis from US financial giant Citi, repeating its short-term outlook for gold to drop to $4300 per Troy ounce before rallying to $5000 in 6-12 months from now.

That still puts Citi's forecast well below the rest of Wall Street, with Goldman Sachs, Deutsche Bank and Bank of America all calling making gold price forecasts for 2026 to end at $6000, with No.1 US bank − and London bullion clearer − J.P.Morgan forecasting $6300 per ounce.