Gold Prices Decline as New U.S. Strikes on Iran Renew Inflation Concerns
Gold prices moved lower on Tuesday after renewed U.S. military strikes against Iran reduced optimism around a potential peace agreement and raised concerns over prolonged geopolitical tensions in the Middle East.
The possibility of continued conflict has increased fears of supply disruptions in the Strait of Hormuz, a critical global oil shipping route, potentially fueling higher energy prices and inflation pressures.
Spot gold fell 0.9% to $4,529.38 per ounce, while gold futures traded slightly higher by 0.1% at $4,561.80 per ounce.
Earlier Peace Hopes Had Supported Precious Metals
Gold and other precious metals previously gained momentum following reports over the weekend suggesting progress in negotiations between the United States and Iran.
Investors had hoped a potential agreement could lead to the reopening of the Strait of Hormuz, easing pressure on energy markets and reducing inflation concerns.
However, sentiment shifted after the U.S. military confirmed new strikes targeting Iranian positions.
According to reports, attacks focused on mine-laying vessels in southern Iran, with U.S. Central Command (CENTCOM) describing the operations as defensive actions.
Ceasefire Remains Uncertain Despite Diplomatic Efforts
CENTCOM stated that the existing U.S.-Iran ceasefire remains active. At the same time, Iranian officials warned that any further military actions would be met with retaliation.
Meanwhile, U.S. Secretary of State Marco Rubio said reaching a broader agreement may require several more days, although he stressed that the Strait of Hormuz would reopen “one way or another.”
The uncertainty surrounding geopolitical developments continues to increase volatility across commodity markets.
Rising Oil Prices and Bond Yields Weigh on Gold
As tensions escalated, global oil prices rebounded, adding pressure on gold.
Analysts at UBS noted that gold has recently developed a stronger inverse relationship with government bond yields, meaning rising yields tend to negatively impact bullion prices.
Higher oil prices have also intensified speculation that major central banks — including the Federal Reserve and European Central Bank — could maintain tighter monetary policy or raise interest rates further to control inflation.
Markets are currently pricing in approximately a 40% probability that the Federal Reserve will increase interest rates by 25 basis points before the end of 2027.
Because gold does not generate yield, it often underperforms during periods of elevated interest rates.
Stronger U.S. Dollar Creates Additional Pressure
The rise in bond yields has also supported the U.S. dollar, creating another obstacle for gold prices.
A stronger dollar generally makes gold more expensive for international buyers, potentially weakening demand. The U.S. Dollar Index (DXY) has increased by 1.3% over the past three months.
UBS analysts said higher bond yields, changing expectations around central bank policy and renewed dollar strength have reduced momentum in the gold market.
According to the bank, investors are once again focusing on the opportunity cost of holding non-yielding assets, prompting UBS to lower its projected year-end target for bullion prices.
Gold Faces Short-Term Pressure Despite Safe-Haven Appeal
Although gold remains a traditional safe-haven asset during periods of geopolitical uncertainty, rising yields, persistent inflation risks and a stronger U.S. dollar are currently limiting upside momentum.
Investors are likely to continue monitoring developments in the Middle East, oil markets and central bank policy for clues about gold’s next major move.
