Gold loses 2% on mounting US-Iran tensions

Gold prices lost nearly 2% in the European market on Monday at the start of the week's trading, retreating from a four-week high due to active correction and profit-taking, combined with pressure from the rising U.S. dollar in the foreign exchange market.

The U.S. Navy's seizure of an Iranian cargo ship led to escalating tensions between the United States and Iran over control of the Strait of Hormuz, with Tehran continuing to refuse participation in a new round of negotiations scheduled to be held in Pakistan later today.

Price Overview

- Gold Prices Today: Gold metal prices fell by approximately 2.0% to ($4,737.15), from the opening level of ($4,829.31), and recorded a high of ($4,829.31).

- Upon price settlement on Friday, gold prices achieved an increase of 0.85%, marking the first gain in three days and hitting a four-week high of $4,890.78 per ounce after Iran's announcement to open the Strait of Hormuz to global navigation.

- Last week, the precious metal "gold" achieved an increase of 1.7%, marking its fourth consecutive weekly gain, thanks to the Iranian war truce and improved market sentiment.

The U.S. Dollar

The dollar index rose on Monday by 0.15%, extending its gains for the third consecutive session and reaching its highest level in nearly a week, reflecting the continued ascent of the American currency against a basket of global currencies.

This rise comes amid renewed buying of the U.S. dollar as a safe haven, given the escalating tensions between the United States and Iran and the weakening chances of reaching a peace agreement in the Middle East.

Charu Chanana, head of investment strategy at Saxo, stated: The weekend escalation has revived the geopolitical risk premium just as markets began to price in peace gains.

Iranian War Updates

- The Iranian Navy announced the re-closing of the Strait of Hormuz as of Saturday afternoon until the U.S. blockade on Iranian ships is lifted.

- U.S. President Donald Trump stated that the U.S. Navy intercepted the Iranian-flagged cargo ship "Tosca" in the Gulf of Oman.

- Tehran considered the attack on the ship an "act of maritime piracy" and a flagrant violation of the ceasefire agreement, vowing to respond to this escalation.

- While the Pakistani capital, Islamabad, prepares to host a second round of peace negotiations later today, Iran refuses to participate in this round so far.

- Several international and regional parties are pressuring Tehran to participate in the peace negotiations before the two-week ceasefire agreement expires tomorrow, Tuesday.

Global Oil Prices

Global oil prices rose on Monday by more than 5% as part of a strong recovery from a four-week low, amid renewed fears of supply disruptions from the Arabian Gulf region, especially after the re-closing of the Strait of Hormuz to oil tankers.

Undoubtedly, the rise in global oil prices renews fears of accelerating inflation, which may prompt global central banks to raise interest rates in the near term—a sharp shift from pre-war expectations of cutting or holding rates steady for a long period.

U.S. Interest Rates

- According to the FedWatch tool of the CME Group: the pricing of the probabilities of keeping U.S. interest rates unchanged at the April meeting is currently stable at 99%, and the pricing of the probabilities of raising interest rates by about 25 basis points is at 1%.

- In order to re-price those probabilities, investors are closely following the release of more economic data from the United States.

Gold Performance Expectations

Market strategist Ilya Spivak said: Gold prices fell today after the U.S.-Iran ceasefire, which markets celebrated last week, appeared to be collapsing.

Christopher Wong, a strategist at OCBC Bank, stated: In the meantime, we still expect the gold trading trend to be influenced by general risk sentiment, and this depends heavily on the results of the ceasefire talks.

SPDR Fund

Gold holdings at the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, increased on Friday by about 7.71 metric tons, marking the fourth consecutive daily increase and bringing the total to 1,060.62 metric tons, which is the highest level since March 19.