Gold slips 0.9% to $4,529 as US-Iran strikes renew uncertainty

US military strikes against Iran dashed hopes for a diplomatic breakthrough, sending spot gold 0.9% lower as traders recalibrated geopolitical risk.

Spot gold fell 0.9% to $4,529.38 an ounce by 06:13 ET on Tuesday as US military strikes against Iran undermined optimism for a negotiated reopening of the Strait of Hormuz.

"Gold prices have struggled to regain momentum as higher US bond yields, shifting central bank expectations, and renewed US dollar strength reintroduce concerns over opportunity cost," UBS analysts said in a note cutting their year-end gold price forecast.

The US military confirmed strikes against Iranian mine-laying boats in southern Iran, with Central Command describing the operation as defensive while stating the ceasefire remained active. Iranian officials warned that further attacks on military infrastructure would trigger retaliation. Secretary of State Marco Rubio said a formal agreement could "take a few days" but that the Strait of Hormuz would reopen "one way or another." Gold futures edged up 0.1% to $4,561.80 an ounce, while benchmark oil prices rebounded on the supply disruption risk.

Markets now price a 40% probability that the Federal Reserve will raise interest rates by 25 basis points before the end of 2027, a scenario that historically pressures non-yielding assets. The US dollar index gained 1.3% over the past three months, making gold more expensive for international buyers. The next catalyst for bullion will be any further escalation in the Gulf or a confirmed diplomatic resolution, either of which could trigger a sharp repricing of safe-haven flows.

The renewed tensions follow weekend reports suggesting progress in Washington-Tehran negotiations aimed at securing a peace agreement and restoring shipping through the Strait of Hormuz, through which about one-fifth of global oil supply transits. That optimism evaporated after the US strikes, with traders rotating back into crude and out of gold despite the metal's traditional safe-haven status.

Rising bond yields have compounded pressure on bullion. Gold has shown an increasingly inverse relationship with government bond yields, which have climbed as major central banks, including the Federal Reserve and the European Central Bank, may continue tightening to counter oil-related inflation pressures, according to UBS.

Gold remains about 8% below its all-time high set earlier this year, with the $4,500 level emerging as a near-term support zone. COMEX gold inventories and LBMA settlement data will be closely watched this week for signs of physical market stress.

This article is for informational purposes only and does not constitute investment advice.