Gold and silver regained ground on Wednesday (March 4) after a sharp fall on Tuesday (March 3), reflecting renewed safe-haven demand amid geopolitical tensions and market volatility.

Gold had retreated sharply overnight as markets moved beyond initial Middle East tensions and shifted focus to Federal Reserve policy repricing. While threats to the Strait of Hormuz lifted crude prices, the inflationary impact of higher energy costs complicated bullion’s outlook. Elevated oil prices challenge the Fed’s disinflation path, prompting traders to push expected rate cuts from June/July toward September.

The threat to the Strait of Hormuz has driven crude prices higher, but the implications for Gold are more complex than a simple risk-off rally. While geopolitical tensions typically support bullion, the resulting spike in energy costs also raises the prospect that global inflation could remain elevated for longer than previously expected.

Higher oil prices act as a direct challenge to the Fed’s disinflation narrative. Energy costs effectively operate as a tax on economic activity while simultaneously pushing headline inflation higher. As a result, traders have begun pushing back expectations for the next Fed rate cut from June or July toward September.

That shift implies a longer period of policy restraint as the Fed waits to assess how persistent the energy shock may prove. If inflation expectations begin to rise again, policymakers are likely to remain cautious, preferring to keep rates higher for longer until the second-round effects of oil prices become clearer.