Gold Falls as US-Iran Talks Break Down

Gold fell below $4,700 an ounce on Monday, extending last week’s losses as attempts to revive US–Iran peace negotiations faltered and the Strait of Hormuz remained effectively closed, heightening concerns over persistent inflationary pressures. US President Donald Trump cancelled a planned trip by top envoys to resume talks with Iran in Islamabad, while Tehran reiterated it would not engage in negotiations under threats or blockade. Meanwhile, oil prices rallied as the Middle East conflict entered its ninth week, triggering what the IEA has characterized as the largest energy supply shock on record. Elevated inflation risks have strengthened expectations that central banks may keep interest rates higher for longer or even tighten further, weighing on non-yielding bullion. The US Federal Reserve is also expected to proceed cautiously, with gradual rate cuts anticipated under incoming Chair Kevin Warsh.

Gold prices attempted a recovery on Friday, climbing back above $4,700 per ounce as cautious optimism emerged over potential progress in US-Iran peace negotiations. According to Al-Jazeera, Iranian Foreign Minister Abbas Araghchi is scheduled to arrive in Islamabad on Friday evening, citing Pakistani government sources. These sources indicated a "high likelihood of a breakthrough" in the ongoing talks between the United States and Iran. The visit follows recent Iranian-Pakistani talks on a ceasefire, though uncertainties remain. US President Donald Trump reiterated he wants a "great deal" but is "not in a rush." Still, gold faces an over 2% weekly decline as peace negotiations have shown limited progress so far, and the continued closure of the Strait of Hormuz has driven energy prices higher. Rising inflation risks and potential rate hikes continue to weigh on non-yielding bullion.

Gold held below $4,700 an ounce on Friday and was on track to decline about 3% for the week, as escalating tensions between the US and Iran over the Strait of Hormuz drove energy prices higher and intensified inflation concerns. Both sides have maintained their blockades of the strategic waterway, with peace negotiations showing little progress. President Donald Trump also said in a social media post on Thursday that he had ordered the US Navy to “shoot and kill” vessels laying mines in the strait, while US forces also boarded a supertanker carrying Iranian oil in the Indian Ocean. Meanwhile, the US-Iran ceasefire has been extended indefinitely as Washington awaits a new formal proposal from Tehran, while the truce between Israel and Lebanon has also been prolonged by three weeks. Elevated energy prices have heightened inflation risks and bolstered expectations of potential central bank rate hikes, weighing on the appeal of non-yielding bullion.