Spot gold dropped 0.8 per cent to $4,678.39 an ounce, while US gold futures for June delivery declined 0.9 per cent to $4,686.20. The fall came despite renewed geopolitical strain, underscoring how the inflationary impact of higher oil prices can outweigh gold’s traditional appeal as a haven when investors expect interest rates to stay higher for longer. A firmer dollar added pressure by making bullion costlier for buyers using other currencies.
Trump dismissed Tehran’s response to a US-backed peace framework as “TOTALLY UNACCEPTABLE”, leaving talks aimed at ending the 10-week conflict in the Middle East without a breakthrough. The dispute has disrupted maritime traffic through the Strait of Hormuz, a critical waterway for oil and gas exports, and pushed crude prices higher as traders reassessed supply risks.
Iran’s counterproposal sought an end to the war, compensation for damages, sanctions relief, renewed oil trade and stronger control over traffic through the strait. Washington has resisted terms that do not address Iran’s nuclear and missile programmes, while Israel continues to press for the dismantling of Tehran’s nuclear capabilities. Diplomatic efforts have continued through intermediaries, including Pakistan, but weekend clashes and drone activity across the region weakened hopes of a durable ceasefire.
The market reaction exposed a dilemma for bullion investors. Gold normally benefits when political risk rises, but the latest move in oil has sharpened fears that inflation will remain above the Federal Reserve’s target. Higher interest rates reduce the appeal of non-yielding assets such as gold, particularly when Treasury yields and the dollar rise together.
US inflation data due on Tuesday has become a key test for markets. The March consumer price index was already running well above the Federal Reserve’s 2 per cent target, and investors are looking for signs that higher fuel and transport costs are spreading into broader prices. The central bank’s latest financial-stability assessment flagged the Iran conflict and prolonged energy supply disruption as risks that could force tighter monetary policy.
The Strait of Hormuz remains central to the market’s anxiety. Nearly 15 million barrels a day of crude oil moved through the passage in 2025, representing about 34 per cent of global crude trade, with most volumes bound for Asia. The International Energy Agency has described the route as one of the world’s most important energy chokepoints, leaving oil-importing economies exposed when traffic is restricted.
Oil’s surge has also prompted a reassessment of Federal Reserve rate-cut expectations. Some market forecasts now point to a later start for monetary easing, with analysts warning that persistent energy inflation could keep core price pressures elevated through 2026. A higher-for-longer rate outlook would continue to act as a headwind for gold, even if geopolitical stress keeps underlying demand intact.
Physical demand remains uneven. High prices have discouraged some jewellery purchases in major consuming markets, while investment demand for bars and coins has stayed firm among buyers seeking protection from currency weakness and financial volatility. China’s first-quarter gold output fell as safety inspections and production suspensions hit mine supply, adding a separate supply-side factor to a market already shaped by macroeconomic uncertainty.
Silver, platinum and palladium traded mixed as investors weighed industrial demand against weaker risk appetite. Gold’s decline, however, drew the sharpest attention because it came during a period of acute geopolitical stress. That suggests traders are focusing less on the conflict itself and more on its second-round effects: oil costs, inflation expectations, central-bank policy and the dollar.
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