Gold prices traded lower on Monday as investors weighed renewed tensions in the Middle East against expectations that interest rates could remain higher for longer, reducing demand for safe-haven bullion.
By 07:15 ET (11:15 GMT), spot gold had fallen 1.3% to US$4,035.82 an ounce, while gold futures declined 1.1% to US$4,049.92 an ounce.
Media reports suggested that the United States and Iran had reached an agreement to suspend recent military exchanges in the Strait of Hormuz, helping ease immediate concerns over disruptions to global shipping. However, The New York Times, citing a U.S. official, reported that Iran has yet to formally endorse the arrangement.
According to the newspaper, discussions will continue over the implementation of a memorandum of understanding between Washington and Tehran. The Wall Street Journal also reported that negotiations could resume in Doha, Qatar, as early as Tuesday, while Axios was the first outlet to report both the ceasefire agreement and the return to diplomatic talks.
Inflation Concerns Keep Pressure on Bullion
Oil prices remained close to pre-conflict levels, although recent volatility has kept concerns alive that higher energy costs could feed inflation and encourage central banks, including the Federal Reserve, to tighten monetary policy further.
“[T]here’s still plenty of risk facing the oil market. Even so, participants appear to be shrugging off these developments, instead focusing on what a continued recovery in oil flows would mean for the global balance,” ING analysts said.
“This complacency is odd and clearly leaves significant upside risk if the supply recovery proves slow[.]”
Gold also came under pressure from continued strength in the U.S. dollar, which tends to reduce international demand for the metal. Investors have continued to favour the greenback as a defensive asset during the Iran conflict, partly because the United States is viewed as relatively insulated from higher oil prices due to its position as a major energy exporter.
Attention now turns to a busy week of U.S. economic releases, including nonfarm payrolls, consumer confidence, job openings and private-sector employment data, all of which could shape expectations for future Federal Reserve policy.
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