Gold under pressure again with geopolitics

Gold prices are sharply down on Monday as access to the Strait of Hormuz was closed this weekend by Iran.

At around 3:00 pm, the futures contract for gold delivery in June fell by 1.2% to $4,822.90, according to MarketWatch.

U.S. President Donald Trump announced on Sunday that U.S. forces had seized an Iranian-flagged ship in the Gulf of Oman, a move which Tehran promised to retaliate against. The U.S. President also stated that Iran had violated its ceasefire agreement with the United States and threatened on his Truth Social network to “destroy every power plant and every bridge in Iran” if Tehran does not reach an agreement.

Donald Trump made this threat while announcing the arrival of American negotiators in Pakistan on Monday evening for new peace talks. However, Iran still threatened on Sunday not to participate in the talks, stating that Washington’s demands remain excessive.

These new geopolitical tensions are driving up oil prices, fueling speculation of prolonged inflation with less accommodating central banks than expected. This environment is negative for the price of gold, which inherently does not yield any interest.

“The surge in energy prices and inflation expectations [supports] both the dollar and U.S. Treasury yields across the board, thus weighing on gold prices,” said Konstantinos Chrysikos, Kudotrade’s customer manager, in a note on Monday.

“Investment flows could also reverse. After two weeks of capital inflows, gold-backed ETFs could experience new outflows of capital as investors may turn to other assets in response to rising interest rates, putting additional pressure on the precious metal,” he added.

“Gold still plays a fundamental hedging role, but it no longer benefits from automatic safe haven status. The market now considers that war supports oil and the dollar more than it supports gold in the short term,” Jean-François Faure, founder and president of AuCoffre, noted in a Monday statement.

Agefi-Dow Jones The financial newswire