Gold prices clawed back part of their earlier losses after U.S. President Donald Trump said Washington had held “good and productive” discussions with Iran and had ordered a five-day delay on any planned military strikes targeting Iranian power plants and energy infrastructure.
The move follows warnings from Iran that it would strike Israeli power facilities and infrastructure supporting U.S. bases across the Gulf if its own energy network were attacked. Earlier in the session, gold had dropped sharply, effectively erasing most of its gains for the year.
However, Iran’s Fars news agency reported — citing a source — that there had been no direct or indirect contact with the United States, contradicting Trump’s statement that talks with Tehran had been “productive.”
Developments over the weekend had already raised fears of an escalation. Trump issued a 48-hour ultimatum demanding that Iran reopen the Strait of Hormuz, with Tehran warning it would retaliate if the threat was carried out.
Spot gold fell 3.1% to $4,352.5 per ounce by 08:03 ET (12:03 GMT), while gold futures dropped 4.7% to $4,388.29 per ounce. The spot price of gold touched its lowest level since late December earlier in the day.
Spot silver declined 1% to $67.16 per ounce.
“Keep in mind that even if fighting ended right now, the economic fallout from the last several weeks will still be substantial, but at least now there is a line of sight toward resolution,” Vital Knowledge analyst Adam Crisafulli wrote in a note.
Trump issues 48-hour ultimatum to Iran
Over the weekend, Trump warned that Iran had 48 hours to reopen the Strait of Hormuz or the United States would “obliterate” critical energy infrastructure in the country.
Iran responded by threatening strikes against major energy and water infrastructure across the Middle East, while also warning that it would completely shut the strait.
Reports indicated that clashes between Iran and Israel continued through the weekend, with the conflict now entering its fourth week.
Trump’s deadline — particularly if Washington follows through on its threat — could mark a significant escalation in the war, especially if Iran responds with retaliation.
Even so, gold has so far struggled to benefit from the geopolitical tensions created by the conflict.
Gold lags as inflation and rate concerns weigh
Inflation concerns tied to the Iran war have weighed heavily on gold prices in recent weeks, pushing the metal well below key technical levels and limiting its recovery.
Markets are worried that a prolonged conflict could push global inflation higher through rising energy costs, which could prompt major central banks to adopt a more aggressive stance on interest rates.
That possibility gained attention last week after both the European Central Bank and the Bank of England indicated that rate hikes could still be on the table this year.
The Federal Reserve did not signal any rate increases, but markets have increasingly scaled back expectations for rate cuts by the central bank this year.
“The market is trading less on geopolitical hedging flows and more on fears that stickier inflation could prompt a more hawkish central bank stance,” analysts at OCBC said in a note.
They added, however, that the longer-term fundamentals supporting gold remain intact and that prices could strengthen again in the near term.