Efforts to restart peace negotiations between the United States and Iran have reached a stalemate, while energy shipments through the Strait of Hormuz remain blocked. The two-month-long conflict has disrupted global markets and heightened inflation risks, supporting gold prices.
Gold traded within a narrow range of $4,700 to $4,730 per ounce. Earlier, a report by Axios indicated that Iran had submitted a new proposal to the U.S., suggesting the reopening of the Strait of Hormuz while pausing talks over its nuclear program. Over the weekend, U.S. President Trump canceled a planned trip by senior envoys to Islamabad aimed at restarting peace talks. Iran stated it would not participate in negotiations as long as it feels threatened.
According to Wu Dilin, a research strategist at Pepperstone Group Ltd., Iran’s proposal to reopen the Strait of Hormuz has somewhat eased market concerns about persistent inflation and provided support for the U.S. dollar. She noted, “Unless there is sustained and stable navigation through the Strait or a credible path toward a peace agreement, any rebound in gold is likely to be short-lived, with prices continuing to trade in a range.”
Oil prices rose on Monday—due to near-total blockage of the Strait of Hormuz by the two nations—but trimmed gains following the Axios report. The war-induced energy supply shock has amplified inflation risks, increasing the likelihood that central banks will keep interest rates unchanged for an extended period or even raise them. This creates a bearish environment for gold, which pays no interest. Since the conflict broke out in late February, gold prices have fallen approximately 11%.
In a report, Nicky Shiels, head of research and metals strategy at MKS PAMP SA, described gold as being in a “technical no-man’s land.” He stated, “Market confidence is weak, large capital allocations are on hold, and physical gold demand is mixed—'lost’ is an apt description of the current market mood.”
Meanwhile, U.S. Attorney Jeanine Pirro announced on Friday that she would drop an investigation into Federal Reserve overspending, clearing the way for Kevin Warsh, a Trump nominee, to become the next Fed chair. Traders are reassessing the Fed’s interest rate trajectory based on this development. Investors expect that Warsh will not pursue the aggressive rate cuts advocated by Trump but will instead adopt a gradual and steady approach to lowering rates.
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