Gold advanced on Monday as traders assessed the latest setbacks in United States-Iran peace talks and their impact on reopening the Strait of Hormuz. Bullion gained as much as 0.7 percent, erasing earlier losses of up to 1.4 percent, as geopolitical tensions and inflation concerns buoyed demand for the safe-haven asset.
The U.S. and Iran remain deadlocked over how to end the war and reopen the critical waterway, with both sides far apart on a framework. President Donald Trump called Iran's reply to his proposed peace plan unworkable, signaling that his priority appears to be curbing Iran's nuclear ambitions. According to Priyanka Sachdeva, an analyst at Phillip Nova PTE Ltd., this could lead to either further escalation in the Middle East or stalled talks at best.
Oil prices climbed as the near-halt of traffic through Hormuz renewed concerns about a flare-up in inflation. The U.S. dollar and bond yields trimmed gains, both positive moves for gold as it is priced in the greenback and pays no interest. Silver surged more than six percent, while platinum and palladium also advanced.
Gold's Directionless Yet Volatile Path
“Gold prices continue to reflect a broad sideways consolidation, as markets remain trapped between geopolitical anxiety and rising inflation worries,” Sachdeva said. The combination is likely to keep gold “directionless despite extreme volatility across global markets.”
Spot gold rose 0.3 percent to US$4,730.57 an ounce as of 10:20 a.m. in New York. The Bloomberg Dollar Spot Index was little changed.
Indian Gold Purchases Under Scrutiny
Elsewhere, Indian Prime Minister Narendra Modi called on citizens to avoid buying gold for at least a year to preserve foreign-exchange reserves for costly fuel shipments. India is the world’s second-biggest importer of bullion, and gold constitutes the largest share in its import bill after oil.
Fed Independence Concerns
Meanwhile, Federal Reserve Chair Jerome Powell’s tenure is set to end this week. His term has been marked by resistance against political influence, and perceived threats to the Fed’s independence were central to gold’s rally early this year. The combination of geopolitical deadlock, inflation worries, and Fed uncertainty continues to support gold prices amid extreme market volatility.
