Gold prices have declined at the start of the week, reaching a four-month low. This drop follows a period of high market prices that began with the start of the US-Iran conflict.
Recent news reports indicate that the decline occurred shortly after U.S. President Donald Trump announced the postponement of planned military action. He stated that strikes on Iranian energy infrastructure would be delayed, which led to a significant plunge in oil prices.
The price of spot gold fell to 0.4% to $4,470.36 per ounce by 10:53 a.m. ET (1453 GMT). This rate decreased after the gold rate fell by over 8% earlier, to $4,097.99. It posted its worst weekly performance since 1983 on March 20.
Looking at the current scenario, David Meger, director of metals trading, High Ridge Futures, explained, “The overnight sell-off was a continuation of the long liquidation we've seen over the past several sessions, driven largely by expectations of rising interest rates. The dramatic reversal came after Trump's post on Truth Social. The headline triggered broad reversals across markets - metals, energy and equities alike.”
Recent spikes in energy prices from the war in Iran have heightened expectations that interest rates will remain elevated for an extended period. Despite gold's reputation as a safe haven and a hedge against inflation, it has struggled to capitalize on these conditions. This is primarily because higher interest rates increase the opportunity cost of holding non-yielding assets like gold.
Trump said the US and Iran have held constructive talks and that he would postpone any strikes on power plants and energy infrastructure. Conversations with Iran will continue throughout the week, he said in a social media post. However, Iran's Fars news agency, citing a source, said there are no direct or indirect communications with the U.S.
After Trump's comments, oil prices dropped. The dollar's price also dropped suddenly. Looking ahead, experts suggest that a weaker dollar can make greenback-priced bullion more affordable for holders of other currencies.