Gold prices turned lower in Asian trading on Tuesday, retreating sharply as firm oil prices and a more hawkish tone from the Bank of Japan heightened worries about inflation linked to the Iran conflict.
Spot gold declined 1% to $4,633.29 an ounce, while gold futures slipped 1% to $4,646.90/oz by 02:32 ET (06:32 GMT).
Other precious metals followed the downward move. Spot silver fell 3.2% to $75.1425/oz, while platinum dropped 1.3% to $1,961.71/oz.
BOJ holds rates but signals tighter policy ahead; focus shifts to Fed
The pullback in gold came after the Bank of Japan left interest rates unchanged but adopted a more hawkish stance, warning that inflationary pressures—partly driven by the Iran war—could require further rate increases.
The central bank raised its consumer price inflation outlook for fiscal 2026 and pointed to higher energy costs, particularly oil and fuel, as a key driver.
These remarks come ahead of the conclusion of the Federal Reserve’s two-day policy meeting. While the Fed is widely expected to keep rates unchanged, the BOJ’s tone has fueled concerns that U.S. policymakers may also lean more hawkish.
Recent data for March already indicated a noticeable uptick in inflation, adding to market unease.
The U.S. dollar edged higher in Asian trading, extending gains from the previous week.
This Fed meeting is expected to be the last chaired by Jerome Powell before his term ends on May 15. He is set to be succeeded by former Fed governor Kevin Warsh, who recently appeared before Congress for his confirmation hearing.
Iran tensions persist as Hormuz negotiations stall
There has been little progress in easing tensions between the U.S. and Iran, with both sides remaining at an impasse over the Strait of Hormuz and Tehran’s nuclear program.
Iran reportedly proposed reopening the key shipping route earlier this week, but Washington has expressed doubts, particularly because the proposal would delay discussions around Iran’s nuclear activities.
Efforts to restart direct talks faltered over the weekend, as both countries declined to meet in Pakistan, leaving the outlook for future negotiations uncertain.
The inflationary impact of the conflict—combined with oil prices climbing toward levels last seen in 2022—has weighed on gold. Rising interest rate expectations have reduced the appeal of non-yielding assets like bullion, overshadowing its traditional role as a safe haven.