Gold Retreats as Middle East Diplomacy Hopes Weigh on Haven Demand
Gold prices retreated on Monday as traders weighed diplomatic signals in the Middle East against a global monetary policy landscape that has turned more restrictive. Spot gold fell 0.5% to $4,354.30 an ounce by 0648 GMT, retreating from a one-week high reached on Friday.
The decline came despite elevated geopolitical risk, with Washington and Tehran exchanging renewed threats over the weekend. US President Donald Trump warned that Iran would face economic collapse or the elimination of its leadership if it failed to reach a deal, while Iran's military vowed a harsh response to any new attack.
Central banks have tightened policy in recent weeks, with three major central banks raising interest rates in two weeks. The Bank of Japan raised its benchmark rate to 1.25% on Friday, the highest level in 31 years. The Federal Reserve and European Central Bank also increased their rates earlier this month.
Analysts at Standard Chartered said that gold continues to find support from official-sector demand, particularly central bank purchases. However, they noted that rising real yields and a stronger dollar pose headwinds for the metal.