Gold resumes losses on mounting Middle East tensions

Gold prices fell in the European market on Tuesday, resuming losses that paused temporarily yesterday, and moving closer once again to two-month lows, pressured by renewed strength in the US dollar toward multi-week highs against a basket of global currencies, amid escalating geopolitical tensions in the Middle East and rising fears of a renewed Iran war.

As inflationary pressures continue to build on Federal Reserve policymakers, expectations for at least one US interest rate hike this year have increased, while investors await the release of the minutes from the latest Federal Reserve policy meeting on Wednesday.

Price Overview

• Gold prices today: Gold prices fell by around 0.8% to $4,531.19 per ounce, from the opening level at $4,566.56, while recording an intraday high at $4,589.42.

• At Monday’s settlement, gold prices gained around 0.6%, marking the first gain in five sessions, after hitting a near two-month low earlier in the day at $4,480.43 per ounce.

US Dollar

The dollar index rose by more than 0.3% on Tuesday, resuming gains that paused temporarily yesterday and approaching a fresh six-week high, reflecting renewed strength in the US currency against a basket of major and secondary currencies.

The dollar continues to benefit from safe-haven demand, as market sentiment remains fragile despite US President Donald Trump’s decision to postpone a military strike on Iran following Gulf mediation efforts, while markets wait for signs of tangible progress in Pakistan-backed peace negotiations.

Developments in the Iran War

• Trump stated on Truth Social that he agreed to delay the military strike scheduled for Tuesday after intensive talks with Gulf leaders in order to give the Pakistani mediation additional time.

• Trump instructed the Pentagon to remain on full alert and prepared to move militarily “from every direction” if negotiations fail.

• The White House confirmed that any final agreement must include a strict and absolute ban on Iran obtaining a nuclear weapon.

• Tehran officially submitted an updated 14-point response to the US administration through the Pakistani mediator. Iran is demanding a long-term ceasefire, international guarantees, and the lifting of the naval blockade.

• US officials described the new Iranian proposal as “insufficient and lacking meaningful improvement,” although Trump later described the negotiations as showing “very positive progress” following the postponement decision.

• The United States is demanding a 20-year freeze on Iran’s nuclear program, while Tehran continues to reject the proposal.

US Interest Rates

• Kevin Warsh will be sworn in as Chairman of the Federal Reserve on Friday.

• According to the CME FedWatch Tool, markets are currently pricing in a 45% probability of a Federal Reserve rate hike in December, compared with just above 16% at the beginning of May.

• Markets are also pricing a 99% probability that US interest rates will remain unchanged at the June meeting, while the probability of a 25 basis point rate cut stands at just 1%.

• To reprice those expectations, investors continue to closely monitor incoming US economic data, in addition to the minutes of the latest Federal Reserve meeting due on Wednesday.

Expectations for Gold Performance

Financial markets strategist Ilya Spivak said, referring to the April Federal Reserve meeting minutes: “The dominant theme in markets today is that conditions are calming after Friday’s events, and markets are attempting to determine their next direction while waiting for midweek event risks.”

SPDR Fund

Gold holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, increased by 1.43 metric tons on Monday, bringing total holdings to 1,038.85 metric tons.