Gold prices moved lower on Monday as renewed geopolitical uncertainty and persistent expectations of higher interest rates reduced demand for the non-yielding precious metal.
By 07:15 ET (11:15 GMT), spot gold had declined 1.3% to US$4,035.82 per ounce, while gold futures fell 1.1% to US$4,049.92 per ounce.
Reports indicated that the United States and Iran had agreed to suspend their recent exchanges of fire in the Strait of Hormuz, allowing commercial shipping to continue through the strategic waterway. However, according to The New York Times, citing a U.S. official, Iran has not yet formally confirmed the agreement.
The newspaper added that Washington and Tehran are expected to continue discussions on implementing a memorandum of understanding, while The Wall Street Journal reported that negotiations could resume in Doha, Qatar, as early as Tuesday. Axios was the first outlet to report the ceasefire agreement and renewed diplomatic talks.
Oil and Interest Rate Outlook Remain Key Drivers
Although crude oil prices stabilised close to pre-conflict levels, the latest military developments kept concerns over energy-driven inflation alive. Investors continue to expect that major central banks, including the Federal Reserve, could raise interest rates again before year-end to contain inflationary pressures.
“[T]here’s still plenty of risk facing the oil market. Even so, participants appear to be shrugging off these developments, instead focusing on what a continued recovery in oil flows would mean for the global balance,” analysts at ING said in a note.
“This complacency is odd and clearly leaves significant upside risk if the supply recovery proves slow[.]”
Gold also faced additional pressure from a stronger U.S. dollar, which makes bullion more expensive for holders of other currencies. The greenback has benefited from its safe-haven appeal during the conflict, supported by expectations that the U.S. economy, as a major energy exporter, is relatively well positioned to withstand higher oil prices.
Markets are now looking ahead to a busy week of U.S. economic releases, including the monthly employment report, consumer confidence data, job openings and private payroll figures, which could provide further clues on the outlook for monetary policy.