Key Highlights
- Precious metal declined approximately 2% following renewed conflict in the Strait of Hormuz region
- Iranian cargo vessel intercepted by US Naval forces amid mutual accusations of truce violations
- Crude oil prices jumped as much as 7%, heightening inflation concerns and pressuring bullion
- US dollar strengthened by 0.2%, creating additional headwinds for the dollar-denominated commodity
- Bullion has declined approximately 9% since Middle East conflict escalation in late February
Precious metal markets experienced significant downward pressure Monday as escalating confrontations in the Strait of Hormuz sent shockwaves through commodity markets, with crude oil rallying sharply and dragging gold down nearly 2% at its session lows.
Spot bullion declined 0.9% to reach $4,786 per ounce during Asian market hours. Futures contracts retreated 1.5% to settle at $4,804 per ounce. While both instruments clawed back some losses from their intraday troughs, selling pressure persisted throughout the session.
President Donald Trump disclosed over the weekend that US Naval forces had engaged and commandeered an Iranian commercial vessel attempting to breach a maritime blockade. Iranian authorities countered that any vessels approaching the Strait of Hormuz would be considered violations of the existing ceasefire agreement.
Multiple commercial ships were compelled to reverse course from the strategic waterway within hours after Iran had announced its reopening on Friday. This abrupt turnaround intensified skepticism regarding prospects for lasting peace.
The two-week ceasefire agreement reaches its conclusion Tuesday. While Trump indicated optimism for a potential agreement, he simultaneously renewed warnings about striking Iranian critical infrastructure. Tehran countered that no meaningful progress toward productive negotiations appeared likely.
Diplomatic discussions were scheduled to convene in Islamabad, though Iranian state media indicated Tehran had not confirmed participation in any upcoming sessions.
Energy Markets and Currency Dynamics Create Headwinds
Oil prices rocketed upward by as much as 7% Monday after tumbling in the prior trading session. Natural gas also posted gains. The dramatic surge in energy costs reignited anxieties about inflation stemming from the persistent supply disruption.
A strengthening greenback compounded the pressure on precious metals. The Bloomberg Dollar Spot Index advanced 0.2%, elevating costs for international buyers purchasing in alternative currencies.
Gold has now surrendered approximately 9% of its value since the Iranian conflict intensified in late February. The confrontation has triggered an energy supply crisis that has elevated inflation pressures and diminished expectations for central bank interest rate reductions, thereby eroding demand for non-interest-bearing assets such as bullion.
Federal Reserve Leadership and Monetary Policy Implications
Investors are closely monitoring the US Senate confirmation proceedings for Kevin Warsh, Trump’s nominee to chair the Federal Reserve, which are scheduled for Tuesday.
Market observers suggest that any indication Warsh supports accommodative monetary policy could provide support for bullion valuations. Conversely, a more hawkish position on inflation management could trigger additional downside.
Strategists at OCBC indicated they anticipate gold’s trajectory will continue responding to overall risk appetite and developments in ceasefire negotiations. They advised purchasing during price weakness rather than momentum buying, projecting a near-term trading band of $4,700 to $4,900 per ounce.
Lorenzo Portelli, head of cross asset strategy at Amundi, suggested the inflationary consequences from the energy supply shock are more likely to prove transitory than persistent.
Silver declined 1.5% to $79.62 per ounce. The white metal had outpaced gold during the preceding week following an industry assessment highlighting a deteriorating supply deficit anticipated in 2026. Platinum and palladium also registered losses Monday.
Spot gold was quoted at $4,786 as of mid-afternoon Singapore trading hours.
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