dailyloe.com – Gold prices experienced a decline due to concerns surrounding the ongoing negotiations between the US and Iran. These discussions may lead to the prolonged closure of the Strait of Hormuz, impacting inflation risks. On Tuesday, gold fell as much as 2.7%, dropping below $4,600 an ounce before recovering some losses.
US President Donald Trump stated that Iran requested the US to lift its naval blockade of the vital waterway. Iran previously indicated a willingness to accept an interim deal to reopen the Strait in exchange for the US ending its blockade of Iranian ports. However, Iran insists on maintaining some control over shipping through the strait, which is unlikely to be accepted by Washington.
The ongoing conflict has caused significant energy supply disruptions, contributing to rising inflation risks. This situation raises the likelihood that central banks may maintain steady rates or even increase them, which poses a challenge for non-yielding bullion. Since the conflict began at the end of February, gold has lost approximately 13% of its value.
Analysts at Commerzbank AG noted that if oil prices continue to rise, market participants might anticipate an interest rate hike, similar to the situation in mid-March. They suggested that if this occurs, gold prices could drop back toward USD 4,500 per troy ounce. Traders are closely monitoring interest-rate decisions from the US, the European Union, the UK, and Canada this week.
Earlier on Tuesday, the Bank of Japan decided to keep its benchmark rate unchanged at 0.75%. A split vote indicated a higher likelihood of a rate hike in June. By 3:18 p.m. in New York, spot gold had fallen 1.8% to $4,595.51 an ounce. Silver also dropped by 3.2%, reaching $73.13 an ounce, while platinum and palladium experienced declines as well.
The Bloomberg Dollar Spot Index, which measures the US currency, rose by 0.2%. The market remains vigilant as the implications of the US-Iran negotiations unfold.
