Gold prices declined as escalating tensions between the United States and Iran over the Strait of Hormuz drove oil prices higher, reigniting concerns about persistent inflation.
Market Reaction
Bullion fell as much as 1.2 percent before paring some losses during U.S. trading hours. The standoff over the critical waterway has created an uneasy situation with no new peace talks on the horizon. Brent crude extended its advance above $100 per barrel, marking its fourth consecutive gain. Treasury yields and the U.S. dollar also climbed to session highs.
Inflation Concerns
Higher energy prices since the conflict began in late February have stoked worries about sustained price pressures. This may prompt the Federal Reserve and other central banks to keep interest rates elevated for longer or even raise them further, which is negative for non-yielding bullion.
Geopolitical Tensions
U.S. President Donald Trump ordered the Navy to shoot any boat placing mines in the strait, while the military intercepted two oil supertankers attempting to evade the blockade. The Pentagon also reported that U.S. forces boarded a sanctioned vessel transporting Iranian oil in the Indian Ocean.
Market Outlook
The precious metals market is expected to remain cautious and volatile, according to Rhona O'Connell, head of market analysis for EMEA and Asia at StoneX Group Inc. Professional trading houses are reluctant to commit large positions given the febrile geopolitical conditions.
Price Details
Spot gold fell 0.6 percent to $4,710.37 per ounce in New York. Silver slid 2.8 percent to $75.56 per ounce, while platinum and palladium also declined.
