fluctuations in the gold price amid the stalling of talks between Iran and fears of high interest rates

SadaNews - The price of gold dropped after efforts to resume peace talks between the United States and Iran stumbled, and energy flow disruptions continued through the Strait of Hormuz, following months of a war that turned global markets upside down and raised inflation risks.

The precious metal fell by as much as 0.8% to near $4,718 an ounce, continuing a 2.5% decline from the previous week, before trimming losses after Axios reported that Iran had submitted a new proposal to Washington to reopen the Strait of Hormuz.

President Donald Trump canceled a scheduled trip for his top envoys to resume peace talks with Iran in Islamabad, while Tehran stated that it would not negotiate as long as it was under threat.

Oil prices also rose on Monday, with the Strait of Hormuz remaining nearly impassable due to the blockade imposed by the countries.

The energy supply shock caused by the war has increased inflation risks, strengthening the chances that central banks will keep interest rates unchanged for an extended period or even raise them, which puts pressure on gold that yields no return. Gold has lost about 11% since the conflict erupted at the end of February.

Market assessments and the path of gold

Nicky Shields, head of research and metal strategy at MKS PAMP SA, wrote in a note that gold is "in a technically uncertain zone".

She added that "confidence is low, large investments remain on the sidelines, actual demand is mixed, and perhaps the term 'lost' is the most suitable to describe the current market situation".

Traders are assessing the Federal Reserve's stance on borrowing costs, after U.S. Attorney General Janine Pirro stated on Friday that she would abandon the investigation into exceeding costs of the U.S. central bank, paving the way for Trump to nominate Kevin Warsh as the next Fed chair.

Investors do not expect Warsh to propose sharp interest rate cuts as the president suggested, but rather to adopt a measured approach with gradual steps to lower them.

The impact of closing Hormuz on energy markets

In the Middle East, the effective closure of the Strait of Hormuz has disrupted about one-fifth of global oil flows.

The fragile ceasefire held largely over the weekend, but Trump asked his envoys, Jared Kushner and Steve Witkoff, to cancel their trip to Pakistan, which mediates in the talks. Iranian President Masoud Pezeshkiyan said that his country would not enter into "negotiations imposed under threat or blockade".

Axios reported on Monday that Iran has made a new proposal to reopen the Strait of Hormuz, delaying negotiations on the nuclear program to a later stage.

Shields said that "markets have adapted to news that occasionally indicate failure in the ceasefire, and at other times to its persistence", adding: "With gold now turning into a high-risk asset, negatively correlated with oil, and slightly positively related to stocks but not an accurate indicator of either, the demand for purchasing it below the $5,000 level is extremely weak".

Meanwhile, Azerbaijan's state oil fund sold about 22 tons of gold in the first quarter of the year, after a record high peaked in late January, pushing the sovereign fund's gold allocations to the maximum allowed limit.

These sales, valued at over $3 billion at current prices, mark the first time the fund has reduced its reserves since it began purchasing gold in 2012.

Both platinum and palladium have also declined, and the Bloomberg Spot Index for the dollar, which measures the performance of the U.S. currency, fell by 0.1%, after rising 0.3% last week.

Silver price

Silver prices were recorded at around $76 an ounce.