Gold price extends decline amid mixed signals on US-Iran talks

Gold prices extended declines on Tuesday, as investors remained cautious over US-Iran negotiations to end the near-two-month war that has intensified global inflation concerns.

Spot gold fell more than 1% to trade at around $4,763 an ounce — its lowest in over a week. US gold futures saw a slightly lower decline of 0.6%, trading at near $4,800 in New York.

The move came amid inconsistent messaging surrounding ongoing peace talks between the US and Iran. Earlier, President Donald Trump said that an extension of the two-week ceasefire is unlikely, and later threatened to resume attacks should a deal not materialize, but in a morning interview with CNBC, he also said that “a great deal” is still expected to be signed.

“Markets are hesitant about a potential deal between the US and Iran, given the weekend’s developments and mixed rhetoric,” Zain Vawda, ​analyst at MarketPulse by OANDA, said in a note to Reuters. “This is keeping bulls in check ​for now and may confine gold to a tight range until certainty arrives.”

Since the Middle East war began at the end of February, bullion has fallen by about 10% as the closure of the Strait of Hormuz disrupted flows of the global energy supply. This reduced expectations of monetary easing by central banks, causing headwinds for assets like gold that thrive in a low-interest environment.

In recent weeks, however, the yellow metal has been showing signs of recovery as the sides started talks to end the war, though gold investors remain on edge for the time being until a resolution is reached.

Volatility ahead

“Some repositioning and deleveraging during times of cross-asset volatility should be expected,” Marc Loeffert, a trader at Heraeus Precious Metals, wrote in a note to Bloomberg. “This volatility is likely to last for some time but, in the long run, gold will retain its fundamental attraction as a way to retain purchasing power.”

Meanwhile, markets will also be closely watching the confirmation hearing of Kevin Warsh, Trump’s pick to head the Federal Reserve, before the Senate Banking Committee Tuesday morning. Any sense that Warsh will push for rate cutting this year would likely support gold.

Gold is expected to remain volatile but structurally supported, with central bank demand and geopolitical risk helping to establish a price floor above recent correction lows, S&P Global analysts said in a recent post.