Gold prices dipped 0.3% to $4,521.25 per ounce on Monday, pressured by a stronger dollar and rising oil prices as investors awaited President Trump's decision on a proposed deal to extend the ceasefire with Iran. According to The Hindu BusinessLine, US gold futures for August delivery fell 0.9% to $4,551.60, after gold had hit a two-week high in the previous session. The precious metal has now extended its decline for a fourth consecutive session, with the latest trading pattern showing continued pressure as markets digest the mixed signals from Middle East developments. The dollar rose to a near one-week high, making greenback-priced bullion more expensive for holders of other currencies, while oil prices rose more than 2% in early trading on Monday, stoking inflation concerns.
US President Donald Trump said on Friday he would soon decide on a proposed deal to extend the ceasefire with Iran, though the two countries still appeared to differ on significant issues that have been central to the conflict. As reported by The Hindu BusinessLine, the US said it struck Iranian military sites over the weekend, and Iran's Revolutionary Guards said on Monday it had targeted a US base in response. The uncertainty over the ceasefire extension has created additional pressure on gold prices, with traders preferring to wait on the sidelines ahead of key developments. Israeli Prime Minister Benjamin Netanyahu ordered troops to move further into Lebanon in the battle against the Iranian-backed Hezbollah militant group, despite a ceasefire announced more than six weeks ago.
Federal Reserve officials have expressed growing concerns about the Middle East war's impact on the economy, with Fed Vice Chair Michelle Bowman saying on Friday that the Middle East war's impact on the economy, while still being measured, could lead to persistent rises in inflation that might require tighter monetary policy. According to The Hindu BusinessLine, Fed Vice Chair for Supervision Michelle Bowman said on Friday that the impact of the war in the Middle East on the economy, while still measured, could lead to persistent inflation that might require tighter monetary policy. The potential for higher inflation could reinforce expectations of interest rate hikes from the US Federal Reserve, making gold less attractive to investors seeking yield-bearing alternatives. While gold is traditionally seen as a hedge against inflation, it loses its appeal in a high-interest-rate environment as a non-yielding asset.
While gold declined, other precious metals demonstrated resilience with spot silver rising 0.7% to $75.81 per ounce, platinum gaining 1.5% to $1,945.15, and palladium rising 1.4% to $1,372.75. As reported by The Hindu BusinessLine, gold demand in India remained subdued last week due to higher prices and import duties, while premiums in top consumer China narrowed amid cautious sentiment. Gold speculators raised net long positions by 2,544 contracts to 96,931 in the week to May 26, according to CFTC data, indicating some optimism despite the recent price decline. Market analyst Tim Waterer from KCM Trade noted that "By the end of 2026, gold still has potential to hit $5,500 should favourable circumstances arise, notably lower oil prices and a depreciation of the dollar, underpinned by continued robust central bank buying and its role as a geopolitical and inflation hedge."
Looking ahead, markets will focus on key economic data releases including EU HCOB Manufacturing PMI (May) at 0800 GMT, UK S&P Global Manufacturing PMI (May) at 0830 GMT, and US ISM Manufacturing PMI (May) at 1400 GMT. According to The Hindu BusinessLine, the US Core Personal Consumption Expenditures (PCE) Price Index report remains a key catalyst for gold prices, with the headline PCE Price Index expected to show a rise of 3.8% YoY in April compared to 3.5% in March. The combination of geopolitical tensions, dollar strength, and mixed signals from Middle East developments continues to create uncertainty for precious metals markets, with analysts noting that "Oil's uptick in price, combined with the still-elusive US-Iran deal, is just enough to keep gold off balance at the start of the week."
