Gold prices slipped on Tuesday, giving back some of the safe-haven ground they had clawed back in recent sessions. A firmer dollar and persistent doubts about whether U.S.-Iran peace talks can produce a lasting breakthrough kept buyers on the sidelines, even as oil eased on hopes for more supply from the Gulf.
Spot gold dropped 0.7% to $4,785.56 an ounce by mid-morning in London. U.S. gold futures for June delivery fell 0.5% to $4,804.70.
ActivTrades analyst Ricardo Evangelista said the drop, which underlines the uncertainty of the Strait of Hormuz situation, keeps inflationary concerns alive.
“Today’s decline in gold prices reflects fears that, despite the recent drop in oil prices, the situation in the Strait of Hormuz remains uncertain, with the blockade still in place. This uncertainty is keeping inflationary concerns alive, supporting the U.S. dollar in a dynamic that creates a headwind for non-yielding gold,” he said.
The dollar strengthened against most major currencies, making dollar-priced assets more expensive for overseas buyers and adding pressure on everything from gold to other commodities.
Diplomacy in the region remains fragile. The U.S. said it is confident talks with Iran will proceed in Pakistan, and a senior Iranian official signaled Tehran is at least considering participation. But significant obstacles remain as a two-week ceasefire heads toward its deadline. Iran’s foreign ministry sharply condemned what it called a U.S. attack on the commercial vessel Touska over the weekend and demanded its immediate release.
Oil prices fell on expectations that successful negotiations could eventually reopen more crude flows from the Middle East. Yet the Strait of Hormuz, the narrow waterway that normally carries about one-fifth of global oil and gas shipments, is still effectively blocked, keeping a floor under energy costs and, by extension, inflation worries.
Gold’s traditional role as an inflation hedge is being tested right now. While higher crude since the Iran conflict began has supported the metal, the prospect of sustained higher interest rates has blunted its appeal. Non-yielding assets like bullion tend to lose luster when real yields rise.
Markets are also watching Washington closely. Kevin Warsh, President Trump’s nominee to lead the Federal Reserve, faces senators at his confirmation hearing on Tuesday. In prepared remarks released Monday, Warsh said he is “committed to ensuring that the conduct of monetary policy remains strictly independent.”
His views on shrinking the Fed’s balance sheet, pursuing lower rates, and narrowing the central bank’s focus have already sparked debate about the future path of policy. Any hint during the hearing that Warsh favors a more restrained approach could influence rate expectations and, by extension, gold’s fortunes.
Among other precious metals, spot silver fell 1.2% to $78.94 an ounce, platinum lost 1% to $2,068.32, and palladium edged 0.3% higher to $1,555.41.The day’s modest pullback in gold reflects a market caught between two competing forces. Geopolitical risk in the Gulf still provides a cushion, but the stronger dollar and the looming Fed leadership transition are reminding traders that the metal must compete with higher-yielding alternatives.
