TLDR
- Gold prices tumbled as much as 2.2%, temporarily falling beneath the $4,650 per ounce threshold Monday
- Diplomatic efforts between Washington and Tehran in Pakistan collapsed over the weekend
- President Trump announced a naval blockade of the Strait of Hormuz effective 10 a.m. Eastern Time
- March CPI data showed inflation accelerating to 3.3% annually, fueled predominantly by energy costs
- Federal Reserve rate reduction expectations now delayed by at least one year, creating headwinds for gold
Precious metal markets experienced significant turbulence Monday following the breakdown of diplomatic negotiations between the United States and Iran, coupled with Washington’s announcement of a naval blockade in the Strait of Hormuz.
Spot gold experienced a sharp decline of up to 2.2%, momentarily trading beneath the $4,650 per ounce level. The metal subsequently stabilized somewhat, reaching $4,729.02 an ounce during early afternoon trading hours in Singapore.
Futures contracts for gold also experienced downward pressure, declining 0.9% to settle at $4,743.20 per ounce.
Diplomatic discussions conducted in Pakistan over the weekend between American and Iranian representatives concluded without any meaningful breakthrough. The negotiations stalled over fundamental disagreements regarding Tehran’s nuclear program, operational control of the Strait of Hormuz, and Iranian support for regional militant organizations.
Following the failed talks, President Donald Trump authorized a naval blockade of the strategic waterway, scheduled to commence at 10 a.m. Eastern Time Monday. The President additionally announced that US forces would intercept any commercial vessel that had compensated Iran with transit fees for passage through the strait.
BREAKING: President Trump is looking at resuming "limited military strikes" in Iran in addition to the US blockade of the Strait of Hormuz, per WSJ.
Details include:
1. Trump could also resume a full-fledged bombing campaign, though officials said that was less likely
2. Trump…
— The Kobeissi Letter (@KobeissiLetter) April 12, 2026
Prior to the outbreak of hostilities, approximately 20% of global crude oil shipments and liquefied natural gas exports transited through the Strait of Hormuz.
Why Inflation Is Hurting Gold
Energy markets reacted swiftly to the blockade announcement, with oil and natural gas prices climbing sharply. The surge in energy costs elevated inflation forecasts, diminishing the probability of imminent interest rate reductions by the Federal Reserve.
Gold generates no yield, making it comparatively more appealing during periods of reduced borrowing costs. Elevated interest rate expectations diminish its attractiveness relative to yield-bearing assets.
Consumer price index figures published Friday intensified pressure on the precious metal. Inflation accelerated to 3.3% on an annual basis in March, representing a substantial jump from February’s 2.4% reading. The Bureau of Labor Statistics attributed nearly three-quarters of the monthly increase to an unprecedented spike in gasoline prices.
According to CME FedWatch data, market participants have now postponed anticipated rate cut timing by a minimum of 12 months.
The US dollar index appreciated approximately 0.4% Monday, applying additional downward pressure on gold valuations. Because gold is denominated in dollars internationally, dollar strength increases the metal’s cost for foreign purchasers.
Silver experienced a nearly 2% decline to $74.39 per ounce. Platinum prices remained relatively stable, while palladium registered modest gains.
Gold’s Performance Since the War Began
The precious metal has surrendered roughly 10% of its value since Middle Eastern hostilities erupted in late February. During the conflict’s initial phase, a liquidity crisis compelled investors to liquidate gold holdings to offset losses across other asset classes.
In recent sessions, gold has recovered a portion of those losses as economic growth concerns provided some underlying support.
Research analysts at ANZ Banking Group indicated that gold could retest the recent $4,650 floor but suggested the metal may find support at those levels. Union Bancaire Privée, a Swiss private banking institution, reduced its gold allocation from approximately 10% to 3%, though the firm indicated it is now incrementally restoring bullion positions in client portfolios.
Producer price index data from the United States is scheduled for release later this week.
