Why Gold Keeps Slipping During a War: Rate Hikes, 5% Bond Yields and Oil

Gold is supposed to rise when the world gets scary. Right now there is fighting around the Strait of Hormuz, oil is above $100 a barrel, and inflation is high. Yet gold has been falling. Here is why, in plain words.

Where gold stands

On 20 October spot gold was down 0.3% at $4,125.90 an ounce during the US afternoon session, at about 10:05 p.m. Dubai time (UTC+4), according to a Reuters news agency report carried by CNBC, the US business news channel (CNBC/Reuters). That leaves it about 26% below its record of $5,594.82 set in January, and roughly 22% below where it was at the start of the Iran war (same source). During early US trading on 21 October, Kitco, a precious-metals news and price site, had gold near $4,136.70, up 0.31%, and silver near $57.51, down 0.64% (Kitco).

Gold fell further on 22 October. Spot gold dropped 2.2% to $4,051.55 an ounce by 7:44 p.m. Dubai time, its lowest level in more than two weeks, as a jump in oil prices added to inflation worries (CNBC/Reuters, 22 October). Gold futures for October delivery on Comex settled $87.70 lower at $4,042.80, their lowest settlement since 3 August and 23.98% below their record settlement of $5,318.40 set on 29 January 2026, according to Dow Jones Market Data, the price data service of the Dow Jones news group, as published by Morningstar, an investment research firm (Dow Jones via Morningstar).

Reason 1: gold pays no interest

Gold earns nothing while you hold it. A US government bond pays interest. When bond yields are low, giving up that interest to hold gold costs little. When yields are high, the cost goes up. CNBC put it simply: gold "loses its appeal as a non-yielding asset in a high-interest-rate environment" (CNBC/Reuters).

Yields are high. Kitco reported the 10-year US Treasury yield near 5.1% on 21 October, down from recent highs above 5.3% (Kitco). One strategist told Reuters that "US Treasuries do appear more favorable than gold as a safety asset for the moment" (CNBC/Reuters). Bond yields are in the news in Europe too, where France now pays more to borrow than the US, as we explain in why French bond yields are above US Treasuries.

Reason 2: the Fed is raising rates, not cutting

The Federal Reserve, the US central bank, raised rates by a quarter point in September, its first hike this year (CNBC/Reuters). Traders expect it to hold at its 27 to 28 October meeting, with Kitco citing about an 83% chance of no change on 21 October (Kitco). On 22 October traders were pricing in a roughly 80% chance of a rate rise in December, according to the FedWatch tool from CME Group, the Chicago futures exchange operator, which works out the odds from trading in its interest-rate futures (CNBC/Reuters, 22 October). The odds were higher earlier in the week: about 92% on 20 October, as CNBC reported (CNBC/Reuters), and roughly 94% on 21 October, as Kitco reported, for higher rates by the 9 December meeting (Kitco).

Reason 3: oil helps gold and hurts it at the same time

This is the confusing part. War and supply fears should send people to gold. But higher oil also pushes up inflation, and higher inflation makes more Fed hikes likely, which pushes up yields and hurts gold. Kitco described this "competing influence" as the reason gold has struggled to hold rallies despite the conflict (Kitco).

The inflation numbers are not small. Kitco reports September consumer prices rose 3.7% from a year earlier, and producer prices rose 6.3% (same source). Brent crude, the global oil benchmark, climbed back above $110 a barrel on 21 October after more attacks on shipping, and Kitco says shipments through Hormuz remain about 33% below prewar levels (same source).

Why silver behaves differently

Silver is both a precious metal and an industrial one. It faces the same rate pressure as gold, but its industrial side makes it more sensitive to signs of a slowing economy, Kitco notes (Kitco). On 20 October, spot silver rose 1.4% to $57.86 while gold fell (CNBC/Reuters).

Uranium is a different story again: the metal is steady while uranium company shares fall, which we explain in uranium price vs uranium stocks.

The level everyone is watching

"$4,000 is a big level for (gold) to keep an eye on and see if it can hold," Bob Haberkorn of StoneX, a US brokerage firm, told Reuters, adding that much depends on what the Fed says (CNBC/Reuters).

What would change the picture

• Weaker US data. Kitco notes that weak jobs or business-survey figures could cut December hike expectations and lower yields, which would help gold (Kitco).
• A peace deal or lower oil. Less energy inflation would ease pressure on the Fed.
• The September PCE inflation figure, the Fed's preferred inflation gauge, which investors are watching next week (CNBC/Reuters).

Key dates (Dubai time, UTC+4)

• Thursday 22 October, 4:30 p.m.: weekly US jobless claims.
• Friday 23 October, 5:45 p.m.: early October business surveys (PMIs), then 6 p.m. the final University of Michigan consumer survey.
• Wednesday 28 October, late evening: the Fed decision, at the end of its 27 to 28 October meeting.

These times are converted from the US Eastern times and meeting dates Kitco lists (Kitco).

What we couldn't confirm

• The exact start date of the Iran war used in CNBC's "22% below" comparison. The article does not give it.
• A reported compromise proposal from Qatar and Pakistan to the US and Iran. Iran's foreign minister signalled limited prospects for a near-term deal, per Kitco, and neither government confirmed the proposal in sources we read.
• The precise Fed hike probabilities, which change by the hour and differ slightly between sources (about 92% on 20 October, 94% on 21 October and 80% on 22 October).

Not financial advice. Gold and silver prices can move sharply on a single data release. Do your own research before buying or selling anything.