Gold prices received upward pressure in Asian trade on Tuesday, as traders responded to signs that military activity involving Iran could be scaled back and to comments from the U.S. Federal Reserve chair that long-term inflation expectations remain anchored beyond near-term shocks.
Spot gold increased about 1% to $5,556.54 an ounce by 01:17 ET (05:17 GMT), while gold futures climbed 0.6% to $4,587.01/oz. Other precious metals also inched higher on the session: spot silver rose 2.7% to $71.9805/oz and spot platinum gained 0.8% to $1,914.85/oz. Despite the uptick, each metal was positioned to post steep losses for March.
Drivers behind the move
Markets were encouraged by a report that said U.S. President Donald Trump was considering winding down military operations in Iran rather than extending a campaign that could stretch beyond an initial four-to-six-week expectation. The report indicated the president had told aides he was willing to end the U.S. military campaign while leaving the Strait of Hormuz closed.
The report said White House aides judged that a mission to reopen the Strait of Hormuz would likely lengthen the conflict and could entail a complicated military operation. It said Mr. Trump decided the United States could scale back hostilities after achieving primary objectives of impairing Iran's naval and missile capabilities. Washington would then lean on diplomatic channels to press Tehran to reopen the strait and might ask Gulf and European partners to take the lead on reopening efforts.
That account fueled some market hope for an eventual de-escalation, though analysts noted continued closure of the Strait of Hormuz - which supplies about 20% of the world's oil - would sustain energy and inflation concerns.
Adding to support for bullion, Federal Reserve Chair Jerome Powell said long-term inflation expectations remained grounded despite potential short-term shocks. His comments provided some relief for non-yielding assets such as precious metals, which had been battered by rising inflation expectations tied in part to the Iran conflict.
March losses remain deep
Even with Tuesday's gains, gold was on track for its worst monthly performance in 17 years. Spot gold was roughly 14% lower for March and looked set to break a seven-month winning streak.
The yellow metal's slide during the month reflected growing doubts about the likelihood and timing of rate cuts by the Fed, alongside oil price increases driven by the Iran conflict that raised inflation expectations. Signals from other major central banks, including the European Central Bank and the Bank of Japan, that they could consider rate hikes to combat energy-driven inflation contributed to rising yields and diminished the attractiveness of assets that do not pay interest.
Those forces hit other precious metals hard as well: spot silver was down about 23% on the month, and spot platinum was set to lose around 19% in March.
Implications for markets and sectors
- Commodities - Precious metals and energy markets were both affected, with sustained oil supply concerns supporting inflation expectations.
- Fixed income and central banking - Shifts in expectations about rate paths from major central banks influenced yields and the appeal of non-yielding assets.
- Geopolitical risk - Military developments and decisions regarding the Strait of Hormuz continued to be a central factor for energy and inflation outlooks.
Note - Information about policy deliberations and military planning reflected reports and statements described above. The market moves cited are based on the prices and percentages reported for the session and the month.