Gold and silver surge as traders price in a prolonged conflict
Gold and silver rallied sharply on Tuesday, with spot gold climbing $50 — roughly 1.06% to settle at $5,192 per ounce. Silver outpaced its sister metal, surging more than 1.48% to an intraday high near $90.00 before closing at $88.26, a price that represents nearly a tripling in value year-over-year.
The explanation circulating most widely in financial media centered on cooling oil prices: easing inflation fears, rising expectations for Federal Reserve rate cuts, and a more dovish policy outlook sending investors into precious metals. It's a tidy narrative. It also doesn't hold up.
A look at the CME FedWatch tool — the instrument traders use to price rate expectations in real time — shows the probability of the Fed holding rates steady at next week's FOMC meeting sitting at 99.4%. That meeting is seven days away. More telling than the number itself is its trajectory: a month ago, the odds of no change were already near 80%, meaning the outcome has been well-telegraphed for weeks.
Rather than softening as the meeting approaches — which the rate-cut thesis would require — those expectations have only hardened. The probability of a cut has been roughly halved from yesterday and stands at approximately one-fifth of where it was a week ago. The Fed, by every available measure, is not moving. Traders have known this. The metals market knew it too — and bought anyway.
The more credible explanation lies in the Middle East. Now into its second week, the U.S.-Israeli military campaign against Iran is showing none of the signs of resolution President Trump has been promising. At a press conference Monday at Trump National Doral, the president declared the conflict would be over "very soon" and forecast a swift decline in oil prices — remarks that offered brief comfort to energy markets. The reality on the ground suggests otherwise. Iran's Revolutionary Guard Corps has stated publicly that Tehran, not Washington, will determine when hostilities end, while the country's foreign minister has dismissed any return to diplomatic talks. American forces have struck nearly 2,000 targets inside Iran since the campaign began on February 28, and Defense Secretary Pete Hegseth has indicated the Pentagon is actively developing options for further escalation.
The economic fallout is already spreading. Iran has declared the Strait of Hormuz closed — a move that has prompted Iraq to curtail output and forced Saudi Arabia's largest refinery to suspend operations, delivering a supply shock that continues to reverberate through global energy markets. Monday's brief pullback in gold and silver, attributed to dollar strength on inflation concerns, was absorbed almost immediately.
That resilience is the real signal. Safe-haven demand is not a trade being put on in anticipation of easier monetary policy — it is a structural bid being reinforced by a conflict that shows every sign of deepening. Whatever timeline the president has in mind, the metals market is pricing in something considerably more protracted.
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