Gold Pares Sharp Losses

Gold pared losses to trade above $4,480 per ounce on Monday as global markets experienced extreme whiplash following Donald Trump's surprise announcement of a five day pause in planned strikes against Iranian energy infrastructure. The metal initially plunged to its lowest level since January as surging oil prices and hawkish central bank signals shifted the market narrative toward a stagflationary shock. However gold trimmed early losses to trade higher as the potential for de-escalation eased the pressure on non-yielding assets from soaring Treasury yields. While Tehran denied the existence of productive talks, the development suggested that the US administration is moving to limit the energy price surge that decimated global risk appetite. Consequently the safe haven premium remained supported by conflicting reports regarding the Strait of Hormuz and potential joint control over the waterway.

Gold trimmed early losses Monday, trading 3% lower at $4,350 per ounce, after President Trump postponed strikes on Iran for five days, claiming "productive conversations" with Tehran. However, Iran’s state-run Fars News Agency dismissed the claim, reporting no direct or indirect talks with the US and suggesting Trump’s retreat followed Iran’s threat to target all power plants in the region. Despite the temporary reprieve, gold extended its decline for a ninth straight session, hitting its lowest level since early January as the Middle East conflict fueled inflation fears. Last week, gold plunged over 10% amid soaring oil prices and central bank hawkishness, with markets now pricing in a Fed rate hike by year-end. Compounding the pressure, major economies may sell gold reserves to mitigate the war’s economic impact.

Gold fell as much as 8% to $4,100 per ounce on Monday, hitting its weakest levels in four months as the ongoing Middle East conflict intensified inflation fears, while major economies face pressure to boost liquidity, including through gold sales, to offset the war’s impact. The Iran war shows little sign of easing, with President Donald Trump threatening strikes on Iranian power plants if the Strait of Hormuz is not reopened, while Tehran warned it would target key US and Israeli assets across the region if its energy facilities were hit. Last week, gold dropped over 10% as surging oil prices fueled inflation concerns, prompting markets to price in a prolonged pause or potential rate hikes from major central banks. Traders are increasingly betting on a possible Federal Reserve rate increase toward year-end amid fears of persistent inflation. The ECB, BOE and BOJ also kept rates unchanged last week but signaled readiness to tighten policy further if inflationary pressures persist.