Gold Drops on US Blockade of Hormuz

Gold traded around $4,700 an ounce on Friday after experiencing sharp volatility in the previous session, as renewed clashes between the US and Iran weakened hopes for a near-term peace agreement and reignited inflation concerns. US Central Command said American forces intercepted Iranian attacks and launched defensive strikes while guided missile destroyers moved through the Strait of Hormuz, while stressing that the military does not seek further escalation. Meanwhile, the Trump administration is awaiting Iran’s response to a proposal aimed at reopening Hormuz and ending the nearly 10-week conflict, with reports indicating that Tehran is expected to respond through Pakistan within the next two days. Gold remains down more than 10% lower since the conflict began, as the effective closure of the Strait of Hormuz triggered a historic surge in energy prices, fueling inflation fears and strengthening expectations that central banks may need to raise interest rates.

Gold climbed above $4,700 an ounce on Thursday, extending gains from the previous session as hopes for a US-Iran agreement triggered a sharp decline in oil prices and helped ease inflation worries. Reports indicated that the US had sent a one-page memorandum of understanding through Pakistani mediators aimed at formally ending the conflict and potentially allowing the gradual reopening of the Strait of Hormuz. Tehran is expected to respond in the coming days after confirming it was reviewing a US peace proposal, while more comprehensive negotiations over Iran’s nuclear program are reportedly expected later. Oil prices tumbled, easing concerns over inflationary pressures and reducing expectations that central banks would need to maintain restrictive policies for longer. Still, Federal Reserve Bank of Chicago President Austan Goolsbee warned that inflation has not continued to cool toward the US central bank’s 2% target and has instead accelerated since the outbreak of the war.

Gold climbed above $4,700 an ounce on Wednesday, rising for a second consecutive session as signs of de-escalation in the Middle East pushed oil prices lower, easing inflation concerns. According to Axios, the White House is nearing a one-page Memorandum of Understanding with Iran to end the conflict and begin nuclear negotiations, the closest the parties have been to a deal since the conflict started. The proposal would require Iran to accept enhanced UN inspections, halt nuclear enrichment for 12–15 years, potentially transfer highly enriched uranium abroad, and limit underground facilities. In return, the US would gradually lift sanctions and unfreeze billions in Iranian assets. Earlier, US President Donald Trump paused escalation plans, citing progress in talks. Gold has faced significant selling pressure since the war began, as soaring energy costs fueled inflation fears and reinforced expectations that central banks might keep interest rates elevated or tighten policy further.