Gold Declines as Trump Escalates Against Iran and Inflation Fears Rise

SadaNews - Gold prices fell amid ongoing losses as the war in the Middle East escalates, increasing the risks of energy supply shortages and inflation, at a time when an unexpected decline in U.S. unemployment claims has reduced the likelihood of interest rate cuts.

The precious metal dropped by up to 1.6%, nearing $4600 per ounce, after losing 1.7% in the session prior to the long weekend.

In a social media post, Trump stated that he would bring "destruction" to Iran if it did not open the Strait of Hormuz. Tehran rejected this warning and continued its strikes on energy infrastructure in the region, including a wave of attacks on refining and petrochemical facilities in Kuwait.

Meanwhile, nonfarm jobs in March rose at the fastest pace since the end of 2024, according to data released by the Bureau of Labor Statistics on Friday.

This increase is likely to enhance the Federal Reserve's focus on inflation risks exacerbated by rising oil prices, reducing the chances of lowering borrowing costs. Generally, gold, which does not yield returns, benefits from a low-interest-rate environment.

Inflation Back in Focus

Adding to these concerns, the rise in gasoline prices in the U.S., which American consumers are feeling, will become apparent when key inflation data is released this week.

Economists forecast the Consumer Price Index will rise by 1% in March, marking the largest monthly increase since 2022. The war has added over a dollar to the price per gallon at the pumps, while crude oil prices rose again on Monday.

Gold has fallen more than 12% since the conflict began in late February, as the spike in energy prices fueled inflation fears and reduced the chances of interest rate cuts. Additionally, the appeal of gold as a safe haven has diminished due to investors needing to liquidate positions to cover losses elsewhere.

Robert Gottlieb, a market commentator and former precious metals trader at JPMorgan Chase, stated: "People are pulling their money out of the market to protect their assets."

Impact of Conflicting Trump Messages

Gold has also been influenced by President Donald Trump's often contradictory messages regarding the conflict, ranging from threats to escalate attacks to indications that the war is nearing its end.

The metal had risen over 4% last week, before Thursday's decline ended a four-day winning streak.

Gottlieb commented, "As long as these conflicting messages continue, gold is largely trading based on the news."

New Deadline Without Clarifications

Trump stated he intends to hold a press conference at 1 PM on Monday and mentioned a deadline ending at 8 PM Eastern Time on Tuesday, without providing any details.

On March 26, the U.S. president gave Iran a 10-day ultimatum to reopen the Strait of Hormuz, which ends on Monday evening.

The spot price of gold fell by 1.1% to $4623.32 per ounce at 9:56 AM Singapore time. Silver also dropped by 1.6% to $71.88.

Platinum declined, while palladium saw little change. The Bloomberg Dollar Spot Index, which tracks the performance of the U.S. currency, rose by 0.1% after finishing the previous session up 0.3%.