Gold Slides on Renewed Hormuz Tensions

Gold dropped more than 1% to below $4,800 an ounce on Monday, giving back gains from the previous week as renewed hostilities in the Strait of Hormuz drove oil prices sharply higher, intensifying inflation concerns. In the latest escalation, President Donald Trump said the US Navy fired on and seized an Iranian-flagged cargo vessel in the Gulf of Oman after it ignored warnings to halt while departing Hormuz. Tehran also targeted ships and reasserted control over the Strait, arguing that the US blockade on Iran-linked vessels breached the ceasefire agreement. Meanwhile, Trump indicated there was still an opportunity for a deal ahead of another round of talks in Pakistan, although Iran sees little prospect for an agreement. The prolonged conflict has sparked a historic energy supply shock, heightening inflation risks and raising the likelihood of further central bank rate hikes, which weighed on gold. The precious metal remains down nearly 10% since the onset of the war.

Gold prices slightly extended gains on Friday, rising more than 1% to above $4,850 per ounce, as investors reacted to news that the Strait of Hormuz will remain fully open to commercial shipping during the 10-day ceasefire between Israel and Lebanon. However, vessels are required to transit through a “coordinated route,” according to Iran’s maritime authorities, a condition reiterated by the country’s foreign minister. The announcement triggered a sharp drop in oil prices which fell more than 10%, helping to ease inflationary pressures, at least in the short term. Despite the improved sentiment, the broader situation remains fragile. US President Trump stated that the US naval blockade “will remain in full force” until a comprehensive agreement is reached. Gold is now on track to end the week 0.8% higher, marking a fourth consecutive weekly gain, supported by expectations that a more lasting US–Iran agreement could reduce inflation risks and limit the need for central bank tightening.

Gold increased 2% to 4884.16 USD/t.oz