Gold prices fell slightly, extending the downward trend for the second consecutive session as investors assessed US President Donald Trump's latest statements about the possibility of destroying Iran's infrastructure, along with the impact of a prolonged war on economic growth.
The precious metal at one point fell 0.7% to below 4.620 USD per ounce, after losing more than 2% in the previous two sessions. Mr. Trump set a deadline of 8 pm on Tuesday US Eastern time to reach an agreement with Tehran, otherwise he would begin attacking power plants and bridges, thereby increasing tensions in the conflict that has caused a tightening of global fuel supply and raised concerns about inflation.
Stepping into the sixth week, the war is increasing the possibility that central banks will postpone interest rate cuts or even consider raising interest rates. US government bonds recorded a slight increase in the first session of the week after Mr. Trump's statements, while the market expects the US Federal Reserve (Fed) to keep interest rates unchanged for the rest of the year. Higher interest rates put pressure on gold because the metal does not yield yields.
Gold prices have fallen by about 12% since the conflict in the Middle East broke out at the end of February. The traditional safe haven role of the precious metal has also weakened as investors have to sell off to compensate for losses in other markets. In the past, gold prices have tended to fluctuate in the opposite direction to oil prices, which have increased in the last three consecutive sessions.
In the opposite direction, cost pressure from the energy supply shock is also putting pressure on economic growth, a factor that could support gold prices. The US service economy in March slowed down, with jobs falling the most since 2023 and input costs increasing rapidly.
Despite the price drop, there are still signs that investors are returning to buy at low prices. Gold holdings of exchange-traded funds have increased again in the past week, for the first time since the conflict broke out, according to Bloomberg calculations.
At a press conference on Monday, Mr. Trump emphasized that the Strait of Hormuz needs to be reopened as a condition in any agreement with Iran to end the war. The strategic maritime route connecting the Persian Gulf with this global market has been almost closed since the conflict began.
Iran has so far rejected US proposals and warned it would respond by increasing attacks in the region if it continued to be airstriked.
As of 12:00 Vietnam time, spot gold prices increased slightly by 0.1% to 4,660.91 USD per ounce. Silver prices fell 1.2% to 71.96 USD per ounce, while platinum and palladium also simultaneously went down. The USD strength index increased by 0.1%.
