Gold Continues to Decline Amid Stalemate in Hormuz and Rising Inflation Concerns

SadaNews - Gold continued its decline as there was no progress in reopening the Strait of Hormuz, which fueled inflation concerns that drove bond markets sharply down.

The precious metal dropped by up to 1.3% to about $4,547 per ounce, after decreasing by nearly 4% last week.

The United States and Iran remain divided over an agreement to end weeks of war and reopen the Strait of Hormuz, a vital waterway for energy flows that remains effectively closed. Oil prices rose on Monday, increasing the likelihood of interest rate hikes, which puts pressure on gold that does not offer a yield.

The precious metal has traded within a relatively narrow range since its sharp decline in the early days of the war, as investors assess inflation risks that could keep interest rates high, along with growth concerns that might lead to monetary easing as the conflict extends. Gold has fallen by about 15% since the conflict began.

A drone attack on Sunday, which caused a fire near a nuclear power station in the UAE, highlighted the risks of a fragile ceasefire in the Middle East.

Hormuz and Inflation Pressure Gold and Bonds

Bond markets worldwide have fallen amid growing fears that war-driven inflation will pressure central banks to raise interest rates.

This sharp drop has driven yields higher, amid rising doubts regarding the speed at which oil supplies in the Middle East will return to normal.

With yields rising, Daniel Hynes, Senior Commodity Strategist at "ANZ Banking Group Ltd", wrote in a note that "the risk-reward ratio in gold has deteriorated, prompting investors to liquidate their positions."

Nevertheless, central banks are expected to eventually shift to monetary easing due to growth concerns, which would support gold. The group anticipates that gold will rise to $6,000 per ounce by mid-2027.

Stronger demand from China is likely to offset decreased demand for gold in India, which has been affected by stricter import policies.

India's imports of the precious metal have slowed to very limited levels as traders cope with higher tariffs. Over the weekend, the country tightened rules on silver imports further in an attempt to defend its currency, which has dropped to an all-time low.

Traders Await Federal Reserve Minutes

Meanwhile, traders will monitor the minutes of the U.S. Federal Reserve meeting in April this week for clues on the future trajectory of interest rates.

The "Bloomberg" spot dollar index, a measure of the performance of the U.S. currency, rose by 0.1%, after increasing by 1.2% last week.

Silver Prices

Silver prices were also recorded near $75 per ounce.