Gold Holds Small Gains

Gold traded above $4,510 per ounce on Monday as the market balanced tentative hopes for a diplomatic resolution against the persistent inflationary risks of a prolonged energy shock. While President Trump cited serious discussions with a more reasonable regime in Iran, Bullion remains sensitive to his concurrent threat to obliterate Iranian oil and power infrastructure if a deal is not reached shortly. Despite these headlines, gold is down more than 15% from its March peak as Brent crude climbing above $115 reinforces expectations that higher energy costs will limit the Federal Reserve's room for aggressive rate cuts. Furthermore a firmer US dollar and a rebound in Treasuries have dampened the appeal of non-yielding assets even as Houthi attacks in the Red Sea sustain a high geopolitical risk premium. As investors weigh El-Erian's warnings of limited policy flexibility the metal's trajectory remains tethered to the outcome of these high-stakes negotiations.

Gold reversed earlier losses to trade around $4,500 per ounce on Monday, remaining volatile as the Middle East conflict entered its fifth week with no clear resolution in sight. Hostilities in the region intensified as Iran-backed Houthi militants in Yemen joined the conflict, targeting Israel over the weekend. The militant group also has the capacity to launch strikes on vessels transiting the Red Sea and key Saudi Arabian energy infrastructure. Meanwhile, the US military is reportedly preparing for weeks of ground operations in Iran after additional troops arrived in the region. Gold remains down more than 15% from its March peak as the oil price shock stoked inflation concerns and reinforced expectations for interest rate hikes from major central banks. A reversal in central bank buying, which had previously supported gold’s rally, further weighed on prices as major economies boost liquidity to counter the economic impact of the Iran war.

Gold rose above $4,500 per ounce on Friday after a sharp decline in the previous session, as President Donald Trump pushed back his deadline for Iran to secure a deal to end the war. Trump pledged to refrain from targeting Iranian energy facilities until April 6, providing some relief to markets unsettled by nearly a month of hostilities. He also said Iran had allowed 10 oil tankers to pass through the Strait of Hormuz this week as a “present” to the US. Meanwhile, Iran confirmed it had rejected the US’ 15-point plan to end the war and submitted its own conditions, including recognition of Tehran’s authority over Hormuz. On Thursday, gold dropped nearly 3% amid persistent doubts that the US and Iran can reach a ceasefire agreement any time soon. Gold and other metals came under heavy selling pressure as the Middle East conflict and surging energy prices fueled inflation concerns and raised expectations that major central banks could hike interest rates this year.