Key Moments
- XAU/USD retreats for a fourth straight session, trading close to $5,000 per troy ounce during European hours on Monday.
- Safe-haven demand for Gold softens amid reports of a potential US-led coalition to protect shipping in the Strait of Hormuz.
Gold Price Under Pressure Amid Higher Energy Costs
Gold price (XAU/USD) extends its losing streak into a fourth consecutive session, fluctuating around $5,000 per troy ounce in European trading on Monday. Non-yielding assets such as Gold remain on the back foot as climbing energy prices strengthen inflationary pressures, which in turn have dampened expectations that the US Federal Reserve and other major central banks will move toward cutting interest rates.
Geopolitical Tensions Centered on Iran and Oil Flows
The United States attacked Iran’s primary oil export terminal at Kharg Island over the weekend, raising concerns about global supply disruptions. US President Donald Trump stated that oil infrastructure was not directly targeted, but the action triggered retaliatory strikes by Tehran against Israel and energy facilities across other Arab nations. The US-Israeli war on Iran has now entered its third week with no clear resolution, unsettling financial markets.
Safe-Haven Demand Eases on Prospects of Maritime Coalition
Despite the heightened geopolitical backdrop, precious metals, including Gold, have come under pressure as safe-haven flows moderated following reports that the United States may unveil a coalition to escort commercial vessels through the Strait of Hormuz. President Trump has urged allied countries, including the UK, France, China, and Japan, to participate in efforts to secure the key maritime chokepoint.
At the same time, European Union foreign ministers are convening in Brussels to consider a potential naval response to the effective closure of the Strait, a critical route for global energy shipments.
Outlook for Conflict and Energy Prices
US Energy Secretary Chris Wright indicated that he anticipates the US-Israel conflict with Iran could conclude within “the next few weeks,” a development that could pave the way for a rebound in oil supplies and a subsequent easing in energy prices.
Market Context: Key Factors Affecting Gold
| Factor | Impact on Gold |
|---|---|
| Energy prices and inflation | Higher energy costs increase inflation pressures, lowering expectations for rate cuts, which weighs on non-yielding Gold. |
| Geopolitical risks | Conflict involving the US, Israel, and Iran lifts overall market uncertainty, but safe-haven demand has eased on coalition escort plans. |
| Policy expectations | Reduced confidence in imminent Fed and other central bank rate cuts limits support for Gold. |
Gold FAQs
Why do people invest in Gold?
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Who buys the most Gold?
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
How is Gold correlated with other assets?
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
What does the price of Gold depend on?
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
