Amid escalating inflation concerns due to a lack of progress in reopening the Strait of Hormuz, bond markets have plunged, while gold maintains its downward trend. The price of gold initially fell by 1.3% before recovering most of its losses, rising to around $4,535 per ounce, following a nearly 4% decline the previous week. Significant differences persist between the United States and Iran regarding an agreement to end the weeks-long conflict and reopen the Strait of Hormuz—a crucial energy transit waterway that remains effectively closed. On Monday, oil prices rose after U.S. President Trump reiterated threats against Iran, increasing the likelihood of interest rate hikes, which would pressure non-yielding gold. Since its sharp drop early in the conflict, the precious metal has been trading within a relatively narrow range, as investors weigh inflation risks that could push rates higher against growth concerns that might prompt monetary policy easing if the conflict persists. Gold has fallen approximately 14% since the outbreak of hostilities. A drone attack on a nuclear power plant in the United Arab Emirates on Sunday, which sparked a fire, highlighted the risks to the fragile ceasefire in the Middle East. Global bond markets have plummeted amid growing fears that war-induced inflation spikes will force major central banks to raise interest rates. This plunge has sent yields soaring, as doubts mount over how quickly Middle Eastern oil supplies can return to normal. Daniel Hynes, Senior Commodity Strategist at ANZ Group Holdings Ltd., noted in a report that "gold's risk-reward profile has deteriorated as yields climb, prompting investors to unwind positions." However, they anticipate that central banks will eventually shift to accommodative monetary policy due to growth concerns, which would support gold prices. The institution forecasts gold to rise to $6,000 per ounce by mid-2027. India's gold demand has been impacted by tighter import policies, but robust demand from China may offset this effect. India's gold imports have dropped to very low levels as traders respond to higher tariffs. Over the weekend, India further tightened silver import regulations to defend its currency, with the Indian rupee hitting a record low. Meanwhile, traders this week will closely monitor the minutes from the Federal Reserve's April meeting for clues on the future direction of interest rates. As of the latest update, spot gold is down 0.1% at $4,536.26 per ounce. Silver has fallen 0.8% to $75.22 per ounce, after a cumulative decline of over 5% last week. The U.S. dollar index is up 0.1%, following a 1.2% gain last week.
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