Gold fell on Tuesday as traders weighed whether negotiations between the United States and Iran could keep the Strait of Hormuz shut for longer, a prospect that helped push bullion as much as 2.7% lower and briefly well below $4,600 an ounce. Donald Trump said Iran has asked Washington to lift a naval blockade of the crucial waterway.
The move came after Iran had previously signaled it may accept an interim deal to reopen the strait if Washington ends its blockade of Iranian ports, while still insisting on keeping some control over shipping through the passage. Gold has lost about 13% since the conflict began at the end of February, when the eight-week fight started feeding energy-market turmoil and inflation risks.
Crude oil prices have soared on war disruptions, and that is part of what kept pressure on bullion. Commerzbank AG analysts said that if oil prices keep rising, investors could begin pricing in another interest-rate hike, which would be a headwind for gold because it pays no yield. They said the metal could fall back toward $4,500 per troy ounce if that happens.
Central banks in the United States, the European Union, the UK and Canada were due to announce rate decisions this week, adding to the focus on borrowing costs. The Bank of Japan left its benchmark rate unchanged at 0.75% on Tuesday in a split vote, a result that suggested higher odds of a hike in June. By 3:18 p.m. in New York, spot gold was down 1.8% at $4,595.51 an ounce after paring some losses.
Other precious metals also weakened. Silver slid 3.2% to $73.13 an ounce, while platinum and palladium declined. The Dollar Spot Index rose 0.2%, adding another layer of pressure on bullion as traders moved into the week’s rate decisions with less appetite for non-yielding assets.
The market now looks less interested in the conflict as a safe-haven bid than in what it could do to inflation and central-bank policy. If oil keeps climbing, the old trade that pushed rates higher in March could return, and gold may not find much shelter until those expectations ease.
