Gold Edges Higher as Iran Tensions Keep Markets on Edge
Gold prices moved slightly higher on Tuesday as investors remained cautious amid stalled peace negotiations between the U.S. and Iran, ahead of a key deadline set by President Donald Trump to reopen the Strait of Hormuz.
Spot gold (XAU/USD) rose 0.6% to $4,678.51 per ounce, while June gold futures gained 0.4% to $4,704.45 per ounce.
Trump Escalates Rhetoric Ahead of Deadline
President Trump intensified his warnings, stating that Iran could face severe consequences if it fails to comply with the deadline. He reiterated threats targeting critical infrastructure, including bridges and power plants.
The Strait of Hormuz remains a major flashpoint, handling roughly 20% of global oil supply. Its effective closure has already driven oil prices higher, raising concerns about inflation and global economic growth.
Diplomatic Talks Stall as Risks Rise
Tensions escalated further after reports indicated that Iran halted direct negotiations with the U.S. following Trump’s latest remarks, although indirect talks via mediators continue.
Iran has also warned of broader regional consequences if conflict intensifies, including potential disruptions to additional strategic waterways such as the Bab-el-Mandeb strait.
Gold Still Under Pressure Since Conflict Began
Despite Tuesday’s gains, gold prices remain significantly lower compared to levels before the escalation of the Iran conflict in late February. Spot gold has declined around 11.7% during this period.
The main reason behind this pressure has been rising expectations that central banks will keep interest rates elevated for longer due to inflation risks driven by higher energy prices. As a non-yielding asset, gold typically underperforms in a high-rate environment.
Strong Dollar Weighs on Gold Demand
Another factor limiting gold’s upside has been the strength of the U.S. dollar. Investors have favored the greenback as a safe-haven asset during the geopolitical crisis, making gold more expensive for international buyers.
Market Outlook: Volatility and Limited Upside
Analysts note that while gold recently attempted a rebound, the momentum remains weak. Price action suggests that investors are not yet fully convinced of a sustained upward move.
Technical indicators, such as the MACD, are showing early signs of recovery from oversold levels, but broader macro conditions continue to act as a headwind.
Fed Policy and Economic Data in Focus
Recent U.S. economic data, including a stronger-than-expected March jobs report, has reinforced expectations that the Federal Reserve may keep interest rates higher for longer.
At the same time, markets are increasingly pricing out rate cuts for the year, further limiting gold’s upside potential.
China Continues Gold Accumulation
Providing some support to gold sentiment, China’s central bank extended its buying streak for a 17th consecutive month. Gold reserves rose to 74.38 million fine troy ounces at the end of March, highlighting continued long-term demand.
