TLDR
- Gold prices retreated following a four-session rally as US dollar strength counterbalanced safe-haven buying linked to Middle East tensions
- Joint US-Israeli operations targeted Iran, resulting in the death of Supreme Leader Khamenei and triggering Iranian missile counterattacks
- Silver prices plunged as much as 7.1%, with platinum and palladium experiencing similar declines
- Brent crude surged past $80 per barrel, fueling inflation concerns and pushing Fed rate cut expectations to September at earliest
- Precious metals shipments from Dubai remain suspended following UAE airspace restrictions and airline service interruptions
Gold prices weakened on Tuesday following a four-session advance, with a strengthening US dollar weighing on the precious metal despite intensifying Middle East geopolitical risks.
Spot gold declined to $5,316.38 per ounce during Singapore trading hours. The metal had touched $5,379.65 earlier in the day.
The pullback occurred as the US Dollar Index advanced nearly 1% for the week, reaching levels not seen since late January. When the dollar strengthens, gold becomes costlier for international buyers holding other currencies.
Gold had gained more than 3% during the prior four trading sessions. Market participants had been seeking refuge in safe-haven assets after a significant escalation in Middle Eastern hostilities.
Combined US and Israeli military forces executed extensive strikes against Iran during the weekend. The operations resulted in the death of Supreme Leader Ayatollah Ali Khamenei along with multiple senior Iranian military officials.
Tehran launched retaliatory missile strikes throughout the region. The violence has expanded into Lebanon, while Kuwaiti air defense systems allegedly shot down US aircraft in an apparent friendly fire incident.
President Trump indicated the military campaign might persist for several weeks. He also noted confusion within Iran’s leadership structure following Khamenei’s elimination.
Iran issued threats to close the Strait of Hormuz, a critical passage for international oil transport. This development pushed oil prices substantially higher, with Brent crude exceeding $80 per barrel on Tuesday.
Rate Cut Hopes Pushed Back
Elevated oil prices have intensified inflation worries across the United States. Market participants now anticipate the Federal Reserve won’t implement rate reductions before September, representing a delay from earlier projections.
The Institute for Supply Management reported that manufacturing input costs increased at their quickest rate since 2022 during February. JPMorgan CEO Jamie Dimon cautioned that inflation could pose challenges for the American economy.
Since gold doesn’t generate yield, postponed rate reductions diminish its attractiveness compared to interest-bearing instruments like bonds and cash equivalents. This dynamic limited the metal’s upside despite escalating conflict.
Precious Metals Shipments Disrupted
Silver experienced steep losses, declining as much as 7.1% on Tuesday to reach $86.37 per ounce. Platinum dropped 4% to $2,224.06, while palladium also posted losses.
The regional conflict has created obstacles for physical precious metals transportation. The UAE shut down its airspace during the weekend, halting gold and silver shipments typically transported in commercial airline cargo compartments.
Multiple trading and logistics companies reported their precious metals deliveries to and from Dubai have been suspended without a clear timeline. Ground transportation to alternative regional airports is deemed too dangerous for valuable cargo.
Swiss financial institution UBP suggested gold has “ample scope” to test its record peak above $5,595 per ounce should the conflict persist for multiple weeks.
On Tuesday, drone attacks targeted the US embassy in Riyadh. President Trump pledged an American response.
