On Friday, experienced a sudden surge after establishing strong support at 4.111, reaching a high of 4.185 and closing at 4.172. In contrast, , which had been declining since last Monday from $4,110, reversed course after reaching a low of $3,963 and closed Friday at $4,018.80, following a session high of $4,028.90.
Undoubtedly, 2-year Yields are maintaining an uptrend at a 41-degree angle, after testing a low at 3.365 since March 2, 2026, while gold futures are maintaining a 26-degree slide since March 2, after testing the second peak at $5,434.65.
This inverse co-relation compels to analyze these technical moves while the Federal Reserve is going to meet on July 27-28, and this meeting is just at a 7-day distance, while the Fed is expected to tackle energy-driven inflationary pressure, and the majority of traders are expecting a hike this time as the United States and Iran are far away from the negotiations, when their conflict has reached in 141st day on Saturday.
I don’t know what the next course of action on the war front may be till the Fed meets this month, and the 2-Yr. Yields are just below the peak, tested at 4.426 on January 13, 2025, while gold futures were $2,674.17, just before Donald Trump resumed the Presidential office on January 20, 2025. The time distance was exactly 7 days.
Undoubtedly, prevailing fear of imposing trade tariffs was at the initial stage, as President Trump came with a dream to “Make America Great Again” while the oil futures were hovering near $82, started to slide soon Trump resumed office on January 20, 2025, and this slide turned steeper in Mar and April, when Trump administration started to plan imposing trade tariff, leading to steep fall in , which tested a low at $58.72 on April 9, 2025.
On the other side, advent of easing era started, when the Federal Reserve started to slash interest rates consecutively one after other, resulted in safe-haven demand, resulting in panic buying in gold and silver by the global central banks during the whole year, resulted in testing fresh peaks by gold futures – first in October, second in December 2025, and finally a record peak at $5,632.70 on January 29, 2026.
Undoubtedly, 2-Yr. yields were consistently facing significant selling pressure below 3.619 since August 2025, and finally tested a low at 3.365 on March 2, 2026, from where an uptrend started, and still intact, and have tested a peak at 4.299 on July 14, 2026, before experiencing some exhaustion amid growing hopes after the signing of an initial peace deal between the U.S. and Iran on June 17, 2026.
But, despite remaining in a tight range between 4 and 4.172, once again signaling fresh strength as energy-driven inflationary pressure has gone beyond limits, despite a plethora of diplomatic attempts, the Strait of Hormuz is still choked, and this conflict has reached its 141st day, and the war looks set to remain forever, as the peace deal has been stuck in a Catch-22 ( https://www.investing.com/analysis/golds-catch22-prolonged-usiran-tensions-extend-bearish-pressure-200683147) position.
Now, the question arises what will happen if the Fed comes out with a hike to tackle the inflationary pressure, which has become rooted much deeper, as the strategic oil reserves of the United States.
As Trump admitted earlier this month, part of his motivation for signing a memorandum of understanding (MOU) with Iran to reopen the Strait of Hormuz was a looming global recession if energy reserves continued falling.
“We run out of reserves at about four weeks,” Trump said in France on June 17, discussing the MOU. “You know, there are reserves all over the world, and we would really run out, and there’ll be a time when you wouldn’t be able to get it.”
He said it would be “bedlam” if the oil ran out.
Meanwhile, this week, the U.S. strategic petroleum reserves remain at historically low levels.
As a result, there is less cushion to absorb a prolonged supply disruption than in the previous round of fighting, increasing the risks of sharper energy price spikes, higher inflation and broader economic disruption.
The twists and turns of the conflict have resulted in corresponding spikes and dips in oil and gas prices.
While last month saw a cooling in inflation, gas prices jumped again this week as Trump shifted back into battle mode, pointing to how quickly the economy could turn in the other direction.
On the other hand, the U.S. engaged in almost 40 days of full-on war with Iran before pulling back during a ceasefire struck in early April. Trump faces peril at home and abroad if he ditches diplomacy and returns to an all-out military offensive.
The first phase of the Iran war expended a tremendous amount of munitions. Central Command (Centcom) Commander Adm. Brad Cooper told the Senate in May that the military had fired over 13,000 strike munitions by the time the ceasefire was reached.
The U.S. fired almost 50 percent of its Patriot missile stockpile; more than half of Terminal High Altitude Area Defenses (THAADs), which are used to protect against short-, medium-, and intermediate-range missiles; and over 45 percent of its Precision Strike Missiles (PrSMs) stockpile during the campaign, according to an analysis from the Center for Strategic and International Studies.
The Pentagon is now lobbying Congress to pass a supplemental funding package to help backfill these munitions, in addition to a record $1.5 trillion budget request for fiscal 2027.
House leadership released the text of a third budget reconciliation bill on Wednesday that would commit $60 billion to defense, but that faces an uncertain path forward — as does the entire military spending fight.
If Trump were to return to a fully-fledged war on the scale of joint U.S.-Israeli attacks earlier this year, that would only compound concerns that the U.S. is undercutting its preparedness for other threats, most notably China’s potential invasion of Taiwan.
Military analysts assess it could take the U.S. four years or more to restock its weapons inventory, assuming Congress provides the necessary funding. The resumption of war with Iran will set back that timeline further.
However, Trump’s approval rating, particularly on the economy, has also tracked closely with his moves in Iran. That has Republicans fretting over how the conflict in the Middle East could turn off voters in November.
I conclude that all such mixed factors look evident enough to push energy-driven inflation beyond the control of the global central banks. If this conflict continues beyond this month, gold futures could retest August 2025 levels in August 2026.
