Gold prices fell on Monday after the breakdown of negotiations between the United States and Iran led to a rise in oil prices, which brought back to the forefront concerns about continued inflationary pressures and interest rates remaining at high levels for longer than expected.
The US dollar also rose, making gold priced in US dollars more expensive for investors holding other currencies, which increased the pressure on the precious metal.
Trump's statements dash hopes for de-escalation
US President Donald Trump dealt a major blow to market hopes of a near-term agreement after he rejected Iran's response to the US proposal for peace talks on Sunday.
This situation has led to a decline in expectations for a swift end to the 10-week-long conflict, which has caused widespread damage within Iran and Lebanon, and has led to a major disruption of shipping traffic through the Strait of Hormuz, as well as a rise in global energy prices.
Tim Waterrier, senior market analyst at KCM Trade, said that markets are currently experiencing a decline in hopes for an imminent peace agreement, which is putting pressure on gold amid a renewed rise in crude oil prices.
He added that the continued closure of the Strait of Hormuz to a large extent has kept global energy supplies under severe pressure, supporting a new surge in oil prices.
High oil prices fuel inflation and put pressure on gold.
Higher oil prices pose a direct threat to inflation rates, as they increase energy, transportation and production costs, which in turn increases the likelihood of higher interest rates remaining high for a longer period.
Although gold is traditionally considered a hedge against inflation, rising interest rates reduce its appeal because it is an asset that does not generate periodic returns like bonds or fixed-income instruments.
A semi-annual report issued by the Federal Reserve on Friday indicated that the ongoing war with Iran, and the resulting disruptions to oil prices and supplies, have become the top risk to global financial stability.
In the same context, Goldman Sachs postponed its expectations for the start of US interest rate cuts to December 2026 and March 2027, instead of its previous expectations that indicated September and December of this year, attributing this to the continued rise in energy prices and their impact on inflation.
Markets are awaiting US inflation data.
Investors are now turning their attention to the US Consumer Price Index data for April, due later this week, looking for fresh clues about the likely path of US monetary policy.
This data will be a crucial factor in determining whether the Federal Reserve will continue to hold interest rates steady for a longer period, or will find room to maneuver if clear signs of slowing inflation emerge.
In China, the China Gold Association announced on Saturday that gold production during the first quarter of 2026 declined compared to the same period last year, after safety inspections prompted some smelters to temporarily suspend production for maintenance work.
Tim Waterrey believes that gold will likely continue to move within a range of $4,400 to $4,800 an ounce in the short to medium term, given the current stalemate of a fragile ceasefire without a final peace agreement.
Gold at settlement on Friday
Gold prices rose at the close of trading on Friday, posting weekly gains after two consecutive weeks of losses, as optimism about the imminent end of the conflict in the Middle East boosted risk appetite and eased concerns about inflation and monetary tightening.
Gold futures for June delivery rose 0.42%, or $19.80, to $4,730.70 an ounce, posting weekly gains of 1.85%.
Gold now
The price of gold in spot trading fell by 1.2% to $4,657.89 an ounce.
Meanwhile, U.S. gold futures for June delivery fell 1.4% to $4,665.70 an ounce.
Other minerals
In other precious metals, silver fell 0.2% to $80.13 an ounce, while platinum declined 1.2% to $2,029.95 and palladium dropped 0.7% to $1,481.09 an ounce.
These moves reflect a state of extreme caution in global markets, where gold has become directly hostage to geopolitical developments in the Middle East, oil prices, inflation expectations, and the course of US monetary policy in the coming months.
