Gold prices were largely unchanged in Asian trade on Monday as market participants balanced lingering safe-haven demand from the U.S.-Iran war against mounting worries about the inflationary effects of the conflict and the prospect of higher interest rates.
Market snapshot
Spot gold was steady at $4,612.98/oz by 00:18 ET (04:18 GMT), while gold futures fell 0.4% to $4,624.14/oz. The yellow metal has been coping with two straight months of losses, suggesting limited relief from geopolitical risk so far.
Other precious metals were firmer on the session.
- Spot silver rose about 0.4% to $75.6945/oz.
- Spot platinum gained around 0.9% to $2,010.0/oz.
Developments in the Middle East
U.S. President Donald Trump announced an operation intended to assist commercial vessels transiting the Strait of Hormuz. The announcement did not include specific operational details. Separately, U.S. Central Command said the initiative will involve additional military deployments - of vessels and personnel - in the Middle East.
Iranian officials responded by warning that any U.S. intervention in Hormuz would be treated as a breach of their fragile ceasefire. Iran's Foreign Ministry also said it had received the U.S. response to its 14-point plan to reopen Hormuz and end the war, according to state media reports.
There is no clear, near-term pathway toward ending the conflict or reopening the strait. That lack of resolution is expected to keep oil prices elevated and to keep concerns about inflation prominent in markets.
Policy comments and central bank moves
Minneapolis Federal Reserve President Neel Kashkari said on Sunday that a prolonged Iran war would raise both inflation and economic risks. He cautioned that the uncertainty surrounding the conflict limits the Fed's ability to provide rate guidance and did not rule out the possibility of interest rate hikes to counter inflationary pressures.
Reports indicated Kashkari was among an unusually high number of policymakers dissenting against the Fed's easing bias at a meeting last week, reflecting growing worries over energy-driven inflation.
Other major central banks have either signaled potential rate increases or already begun tightening in response to the Iran crisis. The Bank of Japan, European Central Bank, and Bank of England all signaled potential hikes last week, and the Reserve Bank of Australia is widely expected to raise rates on Tuesday.
Implications for gold
Higher interest rates generally increase the opportunity cost of holding assets that do not yield income, such as gold, which can weigh on demand. That dynamic, combined with persistent geopolitical risk, helps explain gold's measured price action despite ongoing uncertainty in the Middle East.
Market participants remain watchful for further developments in Hormuz and for signals from central banks that would affect real rates and inflation expectations, both of which are key drivers for precious metals.
Summary
Gold stayed near recent levels in Asian trading as investors weighed safe-haven demand from the U.S.-Iran war against higher-for-longer interest rate expectations. Spot and futures contracts showed modest differences in movement while silver and platinum saw small gains. Remarks from a Fed policymaker and signals from other major central banks underscored the risk that rising rates could limit upside for non-yielding assets like gold. Ongoing uncertainty over the Strait of Hormuz and the absence of a clear path to end the conflict leave oil prices and inflation concerns elevated.