On Monday, market expectations of a de-escalation in Middle Eastern tensions surged after former U.S. President Donald Trump announced a temporary pause in planned military strikes on Iranian energy facilities, citing “constructive” ongoing talks between Washington and Tehran. Spot gold plunged more than 5% in early trading, hitting an intraday low of $4,262 per ounce, before paring most losses to settle around $4,480—still down roughly 2% to 2.3% from the previous session. Gold futures mirrored this pattern, dropping nearly 10% at one point before recovering to close about 1.5% lower. Silver, platinum, and palladium also came under pressure, rebounding from their session lows but remaining near year-to-date lows.
Trump’s statement that the U.S. would halt any attack for five days—and his proposal for joint U.S.-Iran management of the Strait of Hormuz—sparked a rapid rise in risk appetite. U.S. equities rose, while the dollar and Treasury yields declined, weakening market bets on further Federal Reserve rate hikes and even fueling speculation about a potential shift toward monetary easing. Yet gold, traditionally viewed as a safe-haven asset, failed to rally; instead, it swung sharply with broader sentiment, highlighting a shift in its recent trading dynamics.
Analysts note that some investors are now favoring a “cash is king” approach during periods of heightened uncertainty, opting to sell highly liquid assets with unrealized gains to meet potential funding needs. Meanwhile, rising oil prices driven by Middle East tensions have lifted inflation expectations, reinforcing the case for prolonged elevated interest rates—a persistent headwind for non-yielding assets like gold.
Some institutions observe that gold has recently behaved more like a risk asset than a traditional haven, particularly over the past few months when momentum-driven trades and retail inflows amplified its pro-cyclical tendencies. Historical patterns suggest that in the immediate aftermath of major external shocks, gold often experiences an initial selloff before entering a sustained upward trend—a sequence seen during the 2008 financial crisis, the 2020 pandemic outbreak, and the 2022 energy crisis.
Market participants are also closely watching central bank activity in the gold market. There is growing speculation that countries holding large gold reserves might slow purchases—or even trim holdings—to support their currencies or finance surging energy import bills, further dampening gold’s rebound potential. With geopolitical risks, energy prices, and shifting monetary policy expectations all intersecting, precious metals markets are likely to remain highly volatile in the near term.
