Gold Prices Decline Amid Uncertainty Over Iran Negotiations

Gold prices experienced a decline following the resurgence of clashes in the Iran conflict, which has cast uncertainty over the negotiations between the United States and Iran aimed at ending the war that has disrupted energy supplies and raised inflation worries.

The precious metal dropped by as much as 0.6%, approaching $4,460 per ounce before reducing its losses, according to Bloomberg.

US President Donald Trump expressed optimism about the possibility of the United States reaching a temporary peace agreement with Tehran soon, contradicting reports from official Iranian media that stated talks with Washington were suspended due to Israeli escalation in Lebanon. A new round of talks between Israel and Lebanon is scheduled for Wednesday. However, the region witnessed new attacks as Iran launched ballistic missiles toward Kuwait and Bahrain, while US forces conducted strikes on Iran's Qeshm Island, as announced by the US Central Command (CENTCOM) on the X platform.

Meanwhile, oil prices rose for the third consecutive day, with Brent crude trading near $97 per barrel.

Market Impact and Investor Sentiment

Ahmed Asiri, a market strategist at Dubai-based Pepperstone Group Ltd, told Bloomberg, "The Middle East remains a key source of uncertainty, and the continuous flow of news continues to affect market sentiment in the short term."

He added, "The recurring cycle of escalation and de-escalation has created a challenging environment for investors trying to assess the true level of risks facing gold."

Since the war began on February 28, gold has moved largely inversely to oil prices. It fell sharply during the initial days of the conflict and continues to trade around 15% below its level immediately before the war, despite moving within a narrow range in recent weeks.

Asiri noted that the precious metal "has maintained a pattern of lower highs, indicating that the underlying market sentiment remains fragile."

Global Inflation Concerns

The prolonged disruption of energy flows through the Strait of Hormuz has raised concerns about global inflation, increasing the likelihood that central banks will keep interest rates unchanged or raise them further. This scenario negatively affects precious metals, which do not provide returns to holders.

Megan Greene, a policymaker at the Bank of England, told Bloomberg that the rationale for maintaining high borrowing costs strengthens as the war continues, suggesting that more officials may join the bank's chief economist, Hugh Pile, who has called for measures to address inflation.

Meanwhile, US data released Tuesday showed that job vacancies in April rose to their highest level in nearly two years, bolstering bets that the Federal Reserve will keep interest rates elevated for a longer period.

Beth Hammack, President of the Federal Reserve Bank of Cleveland, said it makes sense to keep borrowing costs unchanged for now amid economic uncertainty but indicated that officials might need to act soon to tackle high inflation.

By 11:00 a.m. in Singapore, the spot gold price had declined by 0.1% to $4,483.29 per ounce. Silver also fell by 0.1% to $75 per ounce, while platinum remained steady, and palladium rose by 0.2%. The Bloomberg spot dollar index, which measures the performance of the US currency, showed little change.