TLDR
- Gold climbed 0.3% to approximately $4,343 per ounce on Monday following an 11-week low
- Geopolitical risk subsided as Iran declared an end to its military campaign against Israel
- Crude oil retreated on ceasefire news, alleviating inflationary concerns
- Robust employment data from last Friday strengthened expectations for Federal Reserve rate increases, pressuring gold
- The People’s Bank of China purchased 10 tons of gold in May, marking the largest single-month acquisition since 2024
Gold markets found their footing on Monday following Iran’s announcement that it had ceased military activities targeting Israel, providing temporary relief to investors shaken by recent hostilities between the two nations.
Spot gold advanced 0.3% to reach $4,343.70 per ounce during mid-morning trading in New York. Earlier in the session, the precious metal had declined as much as 1.4%, marking its weakest level since March 23.
The turnaround followed confirmation from Iran’s central military command through the semi-official Fars news agency that operations had concluded. Despite the ceasefire, Iranian officials cautioned that any subsequent Israeli aggression would trigger “much harsher and more crushing actions.”
Regional Tensions Create Market Turbulence
The current round of conflict erupted after Israel launched a strike on Beirut. Tehran retaliated with counterstrikes, prompting Israel to respond with attacks on locations in Iran’s central and western regions.
This exchange represented the first direct confrontation between the nations since a tentative ceasefire was established in April.
The military actions constituted the most severe escalation in regional violence since the truce agreement. Gold experienced nearly 5% in losses throughout the previous week as tensions mounted.
Oil prices had surged on the heightened tensions before moderating following ceasefire reports. The ongoing conflict has interfered with energy transportation through the Strait of Hormuz for four months, driving crude prices upward and amplifying inflation anxieties.
Yemen’s Iranian-aligned Houthi forces intensified concerns by declaring a blockade of Israeli vessels in the Red Sea on Monday.
Employment Figures and Monetary Policy Expectations Impact Gold
Gold faced additional downward pressure from Friday’s robust U.S. employment report. American employers added 172,000 positions in May, surpassing analyst projections, while the jobless rate remained steady at 4.3%.
The employment numbers prompted market participants to increase bets on a Federal Reserve interest rate increase at December’s policy meeting. Analysts at ING noted that a December rate hike is now “fully priced” into market expectations.
Rising interest rates typically weigh on gold valuations, as the metal generates no income. Both U.S. Treasury yields and the dollar strengthened following the jobs data release.
The U.S. dollar index retreated modestly on Monday after reaching a two-month peak on Friday. Dollar weakness can provide tailwinds for gold by reducing costs for international purchasers.
Market participants are now focused on upcoming U.S. consumer and producer inflation reports scheduled for later this week to gauge price pressures.
Chinese Central Bank Maintains Accumulation Strategy
A positive factor supporting gold demand comes from persistent Chinese buying. The People’s Bank of China increased its holdings by approximately 10 tons in May, representing the largest monthly addition since 2024.
This purchase extends Beijing’s consecutive monthly gold acquisition streak to 19 months.
Rhona O’Connell, an analyst at StoneX, noted that critical issues stemming from the Middle East conflict remain “unresolved,” stating the firm retains a “downward bias” while monitoring for opportunistic buying at lower price levels.
Silver advanced 0.5% to $68.19 per ounce on Monday, recovering from a nearly 10% decline registered last week.
