Gold falls as markets assess prospects of Iran ceasefire

Gold prices retreated on Thursday, hurt by a firmer dollar and higher oil prices that kept inflation fears intact and sustained expectations of elevated interest rates, while market participants reconsidered the chances of a Middle East ceasefire.

Spot gold was down 2.7% at USD 4,384.38 per ounce by 1:30 p.m. ET (1730 GMT). US gold futures for April delivery settled 3.9% lower at USD 4,376.3.

The US dollar nudged higher, making greenback-priced bullion more expensive for other currency holders.

Gold is weighed down by concerns over higher interest rates and inflation, said Jim Wyckoff, senior analyst at Kitco Metals.

“If the conflict continues, prices could dip below USD 4,000, while a ceasefire and renewed rate-cut hopes could lift them back toward USD 5,000,” he said.

Despite being a hedge against uncertainty and inflation, gold often loses appeal in a higher rate environment as rising yields raise the opportunity cost of holding the metal.

Oil rose as prospects for a prolonged conflict in the Middle East stoked concerns over further supply disruptions. Higher energy prices could exacerbate inflationary pressures across economies.

A US proposal for ending nearly four weeks of fighting is “one-sided and unfair”, a senior Iranian official told Reuters.

Meanwhile, US President Donald Trump said Iran was letting 10 oil tankers transit the Strait of Hormuz as an apparent goodwill gesture in negotiations.

Gold prices have fallen 17% since the US-Israeli war on Iran began on February 28.

“Speculative movements in recent quarters have compromised the ability of gold and silver to effectively serve as safe-haven assets, at least in the short term. The quest for liquidity has fuelled sales of both metals in the first weeks of the conflict,” said analysts at Intesa Sanpaolo in a quarterly note.

Elsewhere, data showed that new applications for US unemployment benefits rose slightly last week, suggesting the labor market remains stable and giving the Federal Reserve scope to hold interest rates steady while monitoring inflation risks linked to the war.

Among other metals, spot silver fell 5% to USD 67.71, platinum was down 4.2% at USD 1,839.67, and palladium shed 5% to USD 1,352.82.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Nia Williams and Devika Syamnath)