Gold prices slide amid fresh Hormuz tensions – Image for illustrative purposes only (Image credits: Unsplash)
Gold prices extended losses early this week, slipping below the $4,600 per ounce mark amid heightened tensions in the Strait of Hormuz and persistent inflation concerns. Traders weighed stalled U.S.-Iran peace talks against a U.S. plan to escort neutral ships through the vital waterway, while elevated oil prices bolstered a hawkish outlook from central banks. The precious metal has shed about 12% since late February, when the broader conflict intensified.[1][2]
Sharp Intraday Declines Signal Vulnerability
Spot gold fell as much as 0.8% to $4,577.33 an ounce during London trading, before stabilizing near $4,580 in the European session. The metal touched a fresh daily low around that level, retreating from Friday’s swing point and testing support below $4,600. U.S. gold futures for June delivery dropped 0.6% to $4,617.40, reflecting broader pressure on non-yielding assets.[2][3]
Silver declined 1.4%, while platinum and palladium also posted losses. The downturn came despite lingering safe-haven appeal, as energy market volatility overshadowed geopolitical risks. Technical indicators pointed to further downside potential, with the MACD showing negative momentum on hourly charts and the RSI hovering near neutral at 49.60.[2]
Hormuz Tensions Fuel Oil Surge and Rate Worries
U.S. President Donald Trump announced “Project Freedom,” a plan to guide stranded neutral ships through the Strait of Hormuz starting Monday, citing positive discussions with Tehran. Yet he expressed skepticism about Iran’s latest peace proposal, casting doubt on diplomatic progress. Iranian officials, including a top lawmaker and the Islamic Revolutionary Guard Corps, warned that U.S. interference would violate the ceasefire, heightening risks of renewed hostilities.[1][4][2]
A tanker reported strikes from unknown projectiles in the strait, adding to maritime security concerns. These developments kept crude oil above $100 per barrel, with Brent at $106.68 and WTI near $99.82, limiting downside but stoking inflation fears. Minneapolis Fed President Neel Kashkari noted that a prolonged conflict would amplify inflationary risks and economic damage, potentially prompting higher rates.[3][2]
Key Hormuz Developments:
- U.S. launches ship escort plan amid stalled talks.
- Iran reviews U.S. counterproposal via Pakistan.
- Warnings of ceasefire violations and escalation.
- Tanker incident raises navigation fears.
Fed’s Hawkish Stance Adds Downward Pressure
The Federal Reserve held its key rate at 3.50%-3.75% last week, with three policymakers dissenting against an accommodative tone – the most since 1992. Chair Jerome Powell concluded his tenure amid rising oil shocks, as officials shifted away from rate-cut expectations. U.S. March inflation data reinforced this view, supporting dollar strength that further weighed on gold.[3][2]
The Bloomberg Dollar Spot Index dipped slightly, but the currency attracted buyers after an initial pullback. Higher yields and a firm dollar typically pressure bullion, even as central bank buying – led by institutions like India’s RBI – provides some floor. KCM Trade’s Tim Waterer highlighted lingering hawkish Fed signals, projecting gold in a $4,400-$5,500 range by year-end, skewed lower if oil stays elevated.[1][3]
What Lies Ahead for Bullion Traders
Analysts eye a break below $4,600 for deeper slides toward April’s $4,512 low, though limited follow-through selling warrants caution. Upcoming U.S. data, including Nonfarm Payrolls, could sway sentiment, but the fundamental tilt favors bears amid unresolved Hormuz issues. Persistent energy disruptions may cap rebounds, keeping gold on edge as talks drag on.
For now, the path remains downward unless de-escalation materializes swiftly.
