Gold prices slid sharply on Monday, surrendering ground as a resurgent U.S. dollar and fresh inflation jitters triggered by renewed turmoil in the Strait of Hormuz overshadowed the metal’s traditional role as a geopolitical safe haven.
Spot gold fell 0.8 percent to $4,790.59 per ounce by 11:03 GMT, after earlier dipping to its lowest level since April 13. U.S. gold futures for June delivery dropped even more steeply, shedding 1.4 percent to $4,811.
The immediate catalyst was a weekend of high-stakes brinkmanship in one of the world’s most critical energy chokepoints. On Sunday, the United States announced it had seized an Iranian cargo ship attempting to breach its naval blockade of the Strait of Hormuz.
Tehran promptly vowed retaliation, raising the specter of a full resumption of hostilities and effectively halting tanker traffic through the narrow waterway that carries roughly one-fifth of global oil supplies.
Oil prices responded with a near-5 percent leap, the sharpest single-day move in months, as traders priced in the risk of prolonged disruption. That energy shock, analysts said, has revived fears that the fragile U.S.-Iran ceasefire could unravel, sending ripple effects through the global economy.
“Oil’s surge after the weekend’s chaotic events surrounding the Strait of Hormuz ensures that inflation risks remain palpable, offsetting gold’s allure as a safe-haven asset,” said Han Tan, chief market analyst at Bybit. “The precious metal has taken a backseat to the dollar’s role as the preferred haven throughout the conflict so far.”
The stronger dollar compounded the pressure. The dollar index climbed as investors sought the world’s reserve currency amid uncertainty, making dollar-denominated gold more expensive for buyers using other currencies. At the same time, benchmark 10-year U.S. Treasury yields rose, lifting the opportunity cost of holding non-yielding bullion.
Gold is widely viewed as both an inflation hedge and a refuge in times of geopolitical stress. Yet in this instance, the very same conflict driving safe-haven demand has also stoked inflation through higher energy costs, prompting expectations of tighter monetary policy from the Federal Reserve. That dynamic has temporarily robbed gold of its shine.
“Barring meaningful and sustained de-escalations in the ongoing conflict, spot gold is expected to keep treading water in these sub-$5,000 levels,” Tan added.
Not everyone is bearish. Nikos Tzabouras, senior market analyst at Jefferies-owned Tradu.com, noted that underlying structural supports for gold have not disappeared. “Nonetheless, gold retains the ability to extend its recent rebound as structural demand drivers persist,” he said. “Central bank buying, de-dollarization, and currency debasement trends may have faded but remain alive and can support bullion.”
The sell-off extended across the precious-metals complex. Spot silver dropped 2.1 percent to $79.07 per ounce, platinum lost 1.7 percent to $2,066.90, and palladium fell 1.6 percent to $1,533.64.
With tensions in the Gulf still fluid and the Federal Reserve’s next policy signals looming, traders will be watching whether the latest flare-up in the Middle East proves short-lived or marks the beginning of a more protracted energy crisis.
For now, at least, the yellow metal finds itself caught between two powerful headwinds: a surging dollar and the very inflation fears it was once expected to protect against.
WHAT YOU SHOULD KNOW
Gold prices fell sharply on Monday, dropping 0.8% to $4,790.59/oz, primarily due to a stronger U.S. dollar and renewed inflation fears sparked by escalating tensions in the Strait of Hormuz.
Surging oil prices (up ~5%) from the renewed U.S.-Iran conflict have heightened inflation risks, causing gold to lose its safe-haven appeal to the dollar and raising expectations of tighter Federal Reserve policy.
Barring major de-escalation, gold is likely to remain range-bound below $5,000 in the near term, despite underlying long-term support from central bank buying and dedollarization trends.1sFast
