Gold prices declined on Monday, pressured by a stronger U.S. dollar and renewed concerns about inflation, which clouded the prospects for future interest rate reductions following the collapse of U.S.-Iran peace negotiations over the weekend. Spot gold fell 0.8% to $4,711.24 per ounce by 11:36 a.m. ET (1536 GMT), having earlier touched its lowest level since April 7. Meanwhile, U.S. gold futures dropped 1.1% to $4,733.40.
The U.S. dollar strengthened, making metals priced in greenbacks more expensive for holders of other currencies. Phillip Streible, chief market strategist at Blue Line Futures, noted that the market is highly sensitive to headlines, with crude oil prices playing a pivotal role since they influence inflation and, consequently, Federal Reserve policy.
In a significant development, the U.S. military announced it would blockade ships departing from Iranian ports following the breakdown of talks, while Tehran threatened retaliatory measures against the ports of its Gulf neighbors. This escalation pushed oil prices above $100 per barrel, intensifying inflation concerns and limiting central banks’ flexibility to lower interest rates.
Higher interest rates diminish the attractiveness of gold, which yields no interest, despite its traditional role as an inflation hedge. Market expectations for a U.S. rate cut by the end of the year have dropped to approximately 21%, down from 40% a month ago, CME’s FedWatch Tool. Since the outbreak of the U.S.-Israel conflict with Iran on February 28, spot gold has declined by 11%.
Analysts at SP Angel described the war-induced selloff as a healthy correction for gold’s long-term outlook, noting that speculative positions have been reduced. Meanwhile, spot silver declined 2.5% to $73.97 per ounce. Paul Wong, market strategist at Sprott Asset Management, highlighted that ongoing uncertainty about oil supply is expected to drive strong structural demand for silver, particularly through increased investment in solar photovoltaic technology.
Other precious metals also saw mixed movements: platinum decreased by 0.8% to $2,027.95, while palladium rose 1.1% to $1,538.00.
