Gold's Rebound Stalls as Analysts Cut Crude Oil Forecasts

The PRICE of GOLD failed to extend yesterday's steep rebound on Tuesday as crude oil fell again but US interest rate expectations firmed ahead of tomorrow's Federal Reserve meeting.

The Strait of Hormuz meantime stayed effectively shut to tanker traffic despite the US and Iran pushing ahead with the ceasefire deal agreed at the weekend, while the UK Ministry of Defence said it's investigating reports that a Russian Navy frigate this morning fired "warning shots" at a yacht in the English Channel.

US President Trump today met Ukraine's President Zelenskyy at the G7 summit in eastern France, telling reporters afterwards that "Russia should make a deal" to end its 4-year war against its neighbour.

"Recent price gyrations notwithstanding, if there is a period when gold ought to be trading at a premium, it is now," says a note from analysts at UK bank and former London bullion market-maker and Gold Fixing auction member Barclays.

But "gold has faced renewed pressure," say analysts at Swiss bullion bank and financial services giant UBS in a note posted last week, "as resilient labor market data and higher real yields prompted markets to shift expectations toward a possible rate hike this year."

Late-afternoon in London saw gold prices lose $30 per troy ounce from the same time Monday, trading around $4325 as silver prices fell back below $70 per ounce.

While traders in US Fed Funds futures expect "no change" at the central bank's June meeting on Wednesday − the first with Trump appointee Kevin Warsh in charge − betting on end-year rates firmed for a rise in December, holding the consensus view at 3.80% per annum.

That's the reverse of what Fed policymakers projected for end-2026 on average in March's "dot plot" survey, a form of "forward guidance" launched under then-Fed chair Ben Bernanke in 2012 and now expected to vanish under Warsh, who has said that rate projections tie the Fed's hands by offering what the market perceives to be a forecast.

Yesterday's drop in market interest-rate expectations and the rebound in gold prices saw US financial giant Citi reverse the cut to its 3-month gold price forecast made in early June, putting it back up by $500 at $4500 per troy ounce.

Citi's commodities analysts also slashed their near-term crude oil forecast on Monday following news of the US-Iran MOU, and cut their 2027 Brent crude outlook from $80 to $65 per barrel.

Last week's note from UBS − posted as the precious metal fell with $25 of $4000 per ounce − said the precious metal "may continue to gravitate toward the $3850-4000/oz range in the near term."

Gold's recent plunge was a "reset" says Barclays in its note, reported by one US news-site under the headline "Gold's correction could lead to a rebound".

With the Fed's decision set to be followed by monetary policy meetings in the UK, Switzerland and Norway on Thursday, the Bank of Japan today raised its key interest rates yet again, taking the annualized return paid on commercial banks' deposits to 1.0%, the highest in 31 years.

Australia in contrast held unchanged for the first time this year, pausing after 3 rate rises as "financial conditions have [already] tightened in response [but] latest data show that headline and underlying inflation are still too high [even though] oil prices have eased in recent weeks."

"The single most important solution to this problem is the fully and unconditionally opening up of the state of Hormuz to shipping," said International Energy Agency boss Fatih Birol on Tuesday

A vital transit point for Middle East oil and gas heading to Asia, the Strait will be "toll free" declared US President Trump again today, also meeting with the leaders of Qatar and the UAE at the G7 major economies summit.

But the volume of vessel traffic through the Strait of Hormuz "has not changed since Sunday's announcement of a US-Iran peace deal," says commodities news-site Argus, "[because] shipowners are waiting for the planned signing on 19 June and further details before attempting transits."

The report of Russian Navy activity in the English Channel comes 3 days after the UK military seized a "shadow fleet" oil tanker accused of dodging anti-Russia sanctions in the same waters, and the day after two Ukrainians linked to Russia were found guilty of arson attacks on property belonging to UK Prime Minister Starmer.