Precious metals opened lower in early Asian trading as a fast-moving conflict involving the U.S., Israel, and Iran pushed investors toward energy and the dollar. Despite the retreat, gold stayed firmly above the $5,000 an ounce level, underpinned by continued haven demand amid the geopolitical shock.
By 18:54 ET (23:54 GMT) spot gold was trading at $5,064.71/oz, down about 2% from prior levels, while gold futures slipped 1.6% to $5,073.21/oz.
The yellow metal has drawn buying as a perceived safe haven since the outbreak of hostilities, but those inflows have been tempered as markets weigh the potential inflationary consequences of the conflict. Higher inflation prospects could prompt a firmer stance from major central banks, which in turn has reduced the relative appeal of gold in recent sessions.
Over the past week the dollar outpaced gold, while oil surged past other commodities as the Iran confrontation raised the prospect of greater supply disruption in crude markets. The dollar index climbed 0.6% on Monday, and Brent crude rallied as much as 20%, pushing well above $100 a barrel.
Market moves accelerated after U.S. and Israeli strikes targeted Iranian oil facilities, an action that marked a potential escalation in the fighting. Iran had also been seen attacking ships in the Strait of Hormuz over the weekend, effectively disrupting a maritime corridor that handles roughly 20% of the world’s oil supplies.
Gold had already experienced volatility last week, slipping about 2% as it oscillated between the $5,000/oz threshold and a near $5,600/oz record high reached in late-January. The metal has recorded sharp swings driven by speculative activity and growing uncertainty about the trajectory of interest rates.
Friday’s U.S. nonfarm payrolls report, which was substantially softer than expected, briefly raised hopes that interest rates might ease. But those hopes have been counterbalanced by renewed attention to the inflationary impact of elevated oil prices.
Other precious metals broadly declined on Monday alongside gold. Spot silver fell 2.5% to $82.12270/oz, while spot platinum dropped 4.2% to $2,050.29/oz.
Market context
- Geopolitical escalation has shifted capital into energy and the dollar, reducing gold's relative performance despite safe-haven flows.
- Strikes on oil infrastructure and attacks on shipping in the Strait of Hormuz have fueled a sharp jump in crude benchmarks, with significant implications for inflation expectations.
- Volatility in gold reflects competing forces: demand for shelter as well as concern that higher inflation could keep interest rates elevated.
The near-term direction for gold will likely remain tied to developments in the conflict, movements in crude prices, and any signals from central banks about policy in response to changing inflation dynamics.