London, July 12, 2026 – As bullion markets prepare to reopen for Asian trade on Monday, gold and silver are poised to confront a fresh escalation in the Strait of Hormuz. However, the initial market response may mirror recent patterns: a rise in oil prices and heightened expectations for interest rate hikes, rather than a straightforward flight to safe-haven assets.
Iran has declared the waterway closed, while U.S. Central Command reports that traffic continues following heavy strikes on Sunday. The mixed signals leave traders grappling with the inflation implications of the conflict.
Last Friday’s trading illustrated this dynamic. Bullion prices declined as energy costs climbed. The CME Group's FedWatch tool now indicates a 69% probability of a rate increase in September. “Every indication points toward the market worrying about inflation,” said Bart Melek, global head of commodity strategy at TD Securities, part of Toronto-Dominion Bank (NYSE:TD).
Price Action Highlights
Spot gold settled Friday at $4,103.23 per ounce, down 0.4% on the day and 1.7% for the week. Spot silver closed at $59.56, down 0.7% on Friday but unchanged for the week. WTI crude oil rose nearly 4% for the week to $71.41 a barrel. The gold/silver ratio stood at 68.9 times.
Among exchange-traded funds, SPDR Gold Shares (NYSEARCA:GLD) fell about 0.3%, and iShares Silver Trust (NYSEARCA:SLV) also slipped 0.3%. Mining stocks showed divergent performance: Newmont (NYSE:NEM) rose 0.5% while Pan American Silver (NYSE:PAAS) declined 1.0%, underscoring that mining equities do not always mirror bullion prices.
Gold, which pays no interest, becomes less attractive when rate expectations rise, as the opportunity cost of holding it increases relative to yield-bearing assets.
Futures Positioning Signals Vulnerability
Data from the Commodity Futures Trading Commission reveal that managed money—including hedge funds—entered the week with a net long gold position of 116,161 contracts, representing 31.2% of open interest. Silver's net long stood at 13,201 contracts, or 12.6% of open interest. Both positions were reduced from the prior week, by 3.3% and 4.2% respectively.
Gold's relatively high concentration leaves it susceptible to further liquidation if inflation data lifts yields. “The market is trading the conflict’s inflation impact more forcefully than its geopolitical label,” noted a strategist.
Physical Market Divergence
In India, physical demand remains weak. Gold traded at a discount of up to $19 per ounce (about 0.5% of spot), while silver commanded a premium of $6.50 (roughly 10.9%). “Silver imports have nearly come to a halt,” said Chirag Thakkar, CEO of Amrapali Group Gujarat. May silver imports fell to 46.8 metric tons from 534.3 tons a year earlier, forcing dealers to rely on domestic producer Hindustan Zinc (NSE:HINDZINC).
In China, the People’s Bank of China added 480,000 ounces of gold in June, extending its buying streak to 20 months. “Counter-cyclical buying is helping stabilize prices,” said Bernard Sin, regional director for Greater China at MKS PAMP.
Key Events This Week
The macro calendar is heavy. On Tuesday, July 14, the U.S. June CPI report will test whether consumer inflation is easing, followed by Fed Chair Kevin Warsh’s testimony before the House committee. Wednesday brings June PPI data and Warsh’s Senate testimony.
Core CPI, excluding food and energy, will be closely watched for signs that higher fuel costs are spreading. A softer CPI, assuming oil does not spike, could lower rate-hike odds and support gold, with silver potentially catching up on a weaker dollar. Conversely, a hot reading or hawkish Warsh would test the crowded gold long.
“If inflation doesn’t come down, rates could go up,” said Michael Feroli, chief U.S. economist at JPMorgan Chase (NYSE:JPM).
The rates-first playbook, however, could break. A verified shipping stoppage or strike on energy infrastructure might trigger a sharp safe-haven opening jump before inflation expectations adjust. Rapid de-escalation with persistent inflation would remove the fear bid without lowering yields. The key signal: whether gold can rise alongside crude. If not, bullion remains more a rate asset than insurance, while silver stays the less crowded, more physically distorted trade.
