Key Points
- Gold declined nearly 2% following weekend incidents at the Strait of Hormuz
- US Navy captured an Iranian cargo vessel amid mutual accusations of ceasefire breaches
- Oil prices jumped as much as 7%, raising inflation concerns and pressuring gold
- The dollar strengthened by 0.2%, creating additional headwinds for the dollar-denominated metal
- Gold has declined approximately 9% since the Iran conflict erupted in late February
Precious metal markets experienced significant downward pressure Monday following escalated tensions in the Strait of Hormuz that sent oil prices soaring and pulled bullion down nearly 2% at session lows.
Spot gold declined 0.9% to reach $4,786 per ounce during Asian market hours. Gold futures retreated 1.5% to $4,804 per ounce. While both contracts recovered modestly from intraday lows, downward pressure persisted throughout the session.
President Donald Trump revealed over the weekend that US Navy forces engaged and captured an Iranian-flagged cargo vessel that attempted to circumvent a naval blockade. Iran declared that any ships approaching the Strait of Hormuz would be considered ceasefire violations.
Multiple vessels were compelled to retreat from the critical waterway mere hours after Iran announced its reopening on Friday. This reversal intensified skepticism regarding the viability of peace negotiations.
The current 14-day ceasefire reaches its expiration on Tuesday. Trump indicated he perceives an opportunity for agreement while simultaneously threatening Iranian infrastructure. Tehran responded by stating that prospects for constructive dialogue remain unclear.
Peace discussions were scheduled for Islamabad, though Iranian media sources indicated Tehran had declined to confirm participation in upcoming sessions.
Energy Markets and Currency Movements Create Headwinds
Oil prices soared as much as 7% Monday after declining the previous day. Natural gas markets also advanced. The substantial energy price movement reignited worries about inflation stemming from the continuing supply disruption.
Strengthening dollar values created additional challenges for gold. The Bloomberg Dollar Spot Index advanced 0.2%, increasing the cost of gold for international buyers using alternative currencies.
Gold has declined approximately 9% since the Iran conflict commenced in late February. The military engagement has triggered an energy supply disruption that elevated inflation and decreased the likelihood of central bank interest rate reductions, diminishing the attractiveness of non-yielding investments like gold.
Federal Reserve Leadership and Interest Rate Projections
Market participants are monitoring the US Senate confirmation proceedings for Kevin Warsh, Trump’s nominee for Federal Reserve leadership, scheduled for Tuesday.
Analysts suggest any indication that Warsh supports monetary loosening could provide support for gold valuations. A more cautious approach to inflation management could drive prices lower.
OCBC strategists indicated they anticipate gold’s trajectory will continue to be influenced by overall risk appetite and ceasefire negotiation developments. They advised purchasing during price declines rather than pursuing upward momentum, projecting a near-term trading range of $4,700 to $4,900 per ounce.
Lorenzo Portelli, head of cross asset strategy at Amundi, suggested the inflationary effects from the energy disruption are expected to be transient rather than sustained.
Silver declined 1.5% to $79.62 per ounce. Silver had previously outperformed gold during the prior week following an industry analysis highlighting an intensifying supply shortage in 2026. Platinum and palladium also recorded losses Monday.
Spot gold was quoted at $4,786 as of mid-afternoon Singapore trading hours.
