The collapse of the U.S.-Iran peace talks sparked fears of an energy squeeze, dragging gold prices down to $4,680 an ounce on Monday. With the Strait of Hormuz firmly shut and oil prices climbing, investors are now wagering that central banks will have to maintain an elevated rate setting for a longer period of time if they hope to tame mounting inflation.
Key Highlights
- Gold dipped 0.5% to $4,685.14/ounce early on in Singapore trading.
- Diplomacy disintegrated when U.S. envoys scrapped peace talks in Islamabad.
- Since the late-February outbreak of conflict, gold has lost 11% value.
- The precious metals all followed gold lower, silver dropped, platinum fell and palladium sagged too.
Gold price falls
Gold touched a low of $4,680 per ounce on Monday April 27, before climbing further at the end of the day as its weekly fall saw it drop over 0.6% lower since Friday. The market reaction came after a weekend of botched diplomacy that included President Trump cancelling a high-level diplomatic mission to Pakistan supposedly aimed at negotiating an Iran ceasefire.
Iranian President Masoud Pezeshkian, meanwhile, said in Tehran that the Islamic Republic would not be willing to negotiate under threats or blockade. The deadlock has left gold traders in limbo even as most big buyers are opting to remain on the sidelines, and the metal is failing to find a clear direction as longer-dated bonds slide.
Gold Falling as Oil Gains
The first and key reason why gold is still going downward, sorry to say, is the war but war will remain what matters on gold trends for now, is the energy costs/interest rates dependency chain. With the Strait of Hormuz virtually shut down, 20% of global oil is trapped and driving oil prices higher. It is this energy shock that pushes world inflation higher. In turn, investors anticipate that the Federal Reserve will hold interest rates steady or even hike them to headline inflation. Because they pay no interest, gold loses its lustre in times of high rates, as others are seen to be better bets instead.
In addition, on Friday the Federal Reserve had greater clarity about its own course of action after a big legal probe into the central bank was closed. Now this set the stage for cautious, measured Kevin Warsh, a Trump pick and one of the more hawkish members of the FOMC who likely will be our next Fed Chair. Aggressive, speedy rate cuts that many investors had hoped for have failed to materialise, this also appears to be weighing on gold.
Analyst takes on a version of market headline roulette
Analysts point to weakness in gold over the last few sessions as it behaves more like a risk asset than a haven, moving inversely with oil and is unable to hold its ground amid geopolitical turmoil. There is little appetite among traders to buy gold while prices are below the psychological $5,000 level as market participants wait for a clear sign on whether the war will escalate or finally reach a diplomatic solution, some experts say.
FAQs
- Why doesn’t gold go up anymore in times of war?
It usually does but right now the war makes oil so expensive that it keeps interest rates high. That is also why high interest rates favour so-called paper investments such as tradable bonds rather than physical gold.
- What is the Strait of Hormuz?
This narrow but critical waterway through which the majority of the world’s oil moves. Fuel is a global shortage because it is blocked.
- Who is Kevin Warsh?
He is a likely next head of the U.S. Federal Reserve. Traders are betting that he will be sober and won’t cut interest rates as fast as some had hoped for.
- How much gold has dropped?
Gold is down roughly 11% since Feb. 28, 2026.
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