Shares of the Goldman Sachs Physical Gold ETF plunged 3.4% to $40.86 on Monday, marking the fund's steepest single-session drop in months as a geopolitical shock in the Strait of Hormuz paradoxically punished the metal that typically thrives on uncertainty. Hormuz Standoff Crushes Gold's Safe-Haven Appeal — How Long Can Rising Yields Keep AAAU on the Ropes?
Shares of the Goldman Sachs Physical Gold ETF tumbled 3.4% to $40.86 Monday as the very geopolitical crisis that should theoretically help gold instead became its worst enemy. Gold slumped as an impasse over the Strait of Hormuz kept energy costs elevated and maintained pressure on the Federal Reserve to raise interest rates further to combat sticky inflation. For AAAU holders, the math is brutal: the fund has shed 5% in a single week, with no company-specific problem to fix — only a macro storm to weather.
• Oil Is Feeding Inflation, and Inflation Is Killing Gold The mechanism is counterintuitive but clear. Brent crude jumped to roughly $106 after President Trump rejected Iran's proposal to de-escalate around the Strait of Hormuz, with Houthi attacks on Saudi infrastructure adding to supply fears.
The U.S.-Iran conflict is now in its eighth month, with Brent crude up more than 70% this year. Normally, war-driven uncertainty lifts gold. But when a crisis primarily operates through oil markets, the inflation consequences can force central banks toward tighter monetary policy, which raises real yields, strengthens the dollar, and reduces gold's appeal as a non-yielding alternative — overwhelming safe-haven demand.
• Treasury Yields at 2007 Highs Make Gold Look Expensive to Own
The 10-year Treasury yield rose to 5.21% on September 28, up 0.05 percentage points from the prior session , while the 30-year hit 5.52%. Gold pays no interest or dividends. When government bonds yield over 5%, investors face a steep opportunity cost holding bullion — every dollar parked in AAAU is a dollar not earning that yield. Borrowing costs remain at 2007 highs, as markets continue to price in expectations that the Fed will need to tighten further.
• The October Rate Hike Is Nearly a Coin-Flip Away From Certainty
Markets are now pricing in roughly 70% odds of another Fed hike on October 28, following last week's 25-basis-point increase.
Swaps are pricing in three additional quarter-point rate increases over the next year. Each hike raises the bar for gold: higher rates strengthen the dollar and make Treasuries more attractive. Until this tightening cycle breaks, AAAU faces persistent headwinds.
• Diplomacy Is the Only Bullish Catalyst in Sight
Trump told Axios he expects Hormuz negotiations to resume this week. A deal that reopens the strait would cool oil, ease inflation expectations, and potentially halt the rate-hike cycle — the one scenario that could reverse gold's slide. Gold prices have traded this month within a narrow $4,230–$4,510 corridor, far below January's nearly $5,600 peak. Shareholders are betting that diplomacy, not fundamentals, will be their lifeline.