Gold climbed on Monday as market participants weighed the latest hurdles in US-Iran negotiations and their effect on efforts to restore traffic through the Strait of Hormuz.
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The United States and Iran are locked in a stalemate over concluding the conflict and reopening the vital passage, with the two sides widely divided on a plan to achieve those goals. President Donald Trump deemed the Islamic Republic’s answer to his suggested peace framework unworkable.
Bullion rose as much as 0.7% during the session, reversing an earlier decline of up to 1.4%. Crude oil also gained as the virtual shutdown of Hormuz traffic intensified worries about a potential spike in inflation. The US dollar and bond yields pared their advances, both supportive for gold because it is denominated in the greenback and yields no interest. Silver jumped more than 6%.
Trump’s dismissal of Iran’s newest proposal signals that his main focus appears to be limiting Tehran’s nuclear program, which implies either heightened tensions in the Middle East or, at best, a pause in discussions, according to Priyanka Sachdeva, an analyst at Phillip Nova Pte Ltd.
Gold prices continue to show a broad sideways pattern, as markets are caught between geopolitical unease and growing inflation concerns, Sachdeva said. That mix is expected to leave gold without a clear direction despite sharp swings in global markets.
In other developments, Indian Prime Minister Narendra Modi on Sunday urged citizens to refrain from purchasing gold for at least one year, aiming to conserve foreign-exchange reserves for expensive fuel imports. India is the world’s second-largest bullion importer, and gold accounts for the biggest portion of its import bill after petroleum.
Separately, Federal Reserve Chair Jerome Powell’s term is scheduled to conclude this week. His leadership has been characterized by his pushback against political pressure. Threats to the central bank’s autonomy were a key driver of gold’s advance earlier this year.
Spot gold added 0.3% to $4,730.57 an ounce as of 10:20 a.m. in New York. Silver rose 5.8% to $84.99. Platinum and palladium also posted gains. The Bloomberg Dollar Spot Index showed little change.
