Gold continued its decline on Monday, holding near a key $4,100 support level, as President Donald Trump's hawkish statements during peace talks with Iran in Switzerland fueled market uncertainty. The precious metal, often seen as a safe haven, was also impacted by the Federal Reserve's continued hawkish stance on monetary policy. This combination of geopolitical tension and central bank policy contributed to a stronger US Dollar Index (DXY) and increased demand for crude oil (WTI).
The peace talks, which aimed to build on an interim agreement from the previous week, were complicated by Trump's threats to restart strikes on Iran over its support for Hezbollah in Lebanon and its closure of the Strait of Hormuz. Despite Vice President JD Vance's efforts to de-escalate, Iran announced it had again shut the strategic strait, which impacts about a fifth of global traded oil. This move, made over the weekend, delayed its full impact on oil prices until markets opened on Monday.
Iranian negotiators temporarily suspended talks in response to Trump's renewed threats, though some progress had been reported on lifting sanctions waivers for Iranian oil exports and unfreezing assets. While the US and Iran, with Qatari mediation, reportedly made progress on keeping the Strait of Hormuz open and enforcing a ceasefire in Lebanon, the overarching geopolitical tension and Trump's firm warnings continued to overshadow the negotiations. Gold's vulnerability reflects investor concerns over potential escalation and the broader economic implications.
