Gold fell to a one-week low on Monday as energy prices surged on renewed tensions in the Middle East between the US and Iran.
Gold prices, however, recovered some of the losses and were trading above $4,800 per ounce. Silver on COMEX also dropped more than 2%.
Fears of a breakdown in the delicate ceasefire between the US and Iran caused oil prices to jump over 5%. This surge followed the US seizure of an Iranian cargo ship and the continued near-complete halt of traffic through the Strait of Hormuz.
Meanwhile, copper prices fell as uncertainty over the ceasefire between the US and Iran weighed on sentiments.
Gold falls over 1%
Gold prices on COMEX fell more than 1% at the time of writing to trade around $4,820 per ounce.
The front-month gold contract on COMEX fell to $4,752 an ounce earlier on Monday, its lowest level since April 13.
Renewed US-Iran tensions introduced uncertainty into markets regarding the prospect of a peace deal, leading to a rise in the dollar to its highest level in a week, though it later pared some of these gains.
Concurrently, benchmark 10-year US Treasury yields increased, making non-yielding assets like bullion less attractive due to a higher opportunity cost.
The probability of a 25-basis point rate cut before the end of the year has fallen to about 32%, down from 37% at the close of last week, according to the CME’s FedWatch Tool.
This change reflects investor sentiment regarding ongoing geopolitical tensions, including the continued closure of the Strait of Hormuz to shipping and reports of skirmishes between the US and Iran over the weekend, despite the existing ceasefire.
“As mentioned before, neither gold nor silver are acting as safe havens. Quite the opposite, as this role now belongs to the US dollar, for now,” said David Morrison, senior market analyst at Trade Nation.
Oil surges
Fears of supply disruptions, coupled with the increased risk of a wider conflict between the US and Iran, led to a surge in crude oil prices following renewed attacks on commercial vessels in the Strait of Hormuz.
At the time of writing, the price of West Texas Intermediate was at $87.12 per barrel, up 5.4%, while Brent was at $95.12 per barrel, up 5.2%.
Reports that Iran had reopened the Strait of Hormuz caused both front-month Brent and WTI crude oil prices to drop to their lowest levels in nearly six weeks on Friday afternoon.
Initially, Tehran announced the Strait would be completely open following a ceasefire agreement between Israel and Lebanon.
However, this decision was quickly reversed after the US declined to lift its blockade on Iranian ports in the region. Consequently, Iran now asserts that the Strait will stay closed until the restrictions on its ports are removed.
Fears of renewed hostilities intensified after the United States announced on Sunday that it had seized an Iranian cargo ship attempting to violate its blockade. In response, Iran vowed retaliation.
Iran has yet to decide on attending the peace talks, though the possibility is under consideration.
Separately, US President Donald Trump told the New York Post on Monday that Vice President JD Vance and the US delegation are expected to arrive in Pakistan within hours for discussions concerning Iran.
Shipping through the Strait of Hormuz has slowed to a near halt, with only three vessels crossing in the last 12 hours, according to Monday’s shipping data.
This is a sharp contrast to the traffic seen on Saturday, when more than 20 ships—carrying commodities like oil, liquefied petroleum gas, metals, and fertilisers—traversed the waterway. Data from Kpler indicates that Saturday’s figure was the highest number of vessel crossings since March 1.
Copper slides
Copper retreated from its recent peak—its highest close since early February—following uncertainty in Washington-Tehran peace negotiations after the US seized an Iranian vessel in the Strait of Hormuz.
After four consecutive weeks of gains, the red metal saw a drop of up to 1.1% during Asian trading before recovering some of its losses.
Fears regarding the global economy once again directed market activity, resulting in a mixed performance for metals. Oil prices, however, saw a spike on Monday, partially recovering from the steep declines experienced last week.
“The major risk for metals is a prolonged closure of the strait, which would magnify the energy shock already rippling through the world economy,” Neil Welsh, head of metals at Britannia Global Markets, said in an emailed commentary.
That could force central bankers into a more hawkish stance, hitting global manufacturing and damaging demand for industrial commodities.
Optimism regarding demand in China is providing some support to prices, as evidenced by a rapid decline in inventories there recently.
Stockpiles tracked by the Shanghai Futures Exchange have fallen by nearly 200,000 tons since peaking on March 13 of this year.
At the time of writing, the three-month copper contract on the London Metal Exchange was at $13,269.60 per ton, down 0.8% from the previous close.
The post Commodity wrap: Gold hits 1-week low as oil surges 5% on Mideast escalation appeared first on Invezz