Gold posted a mild decline, extending its two-day downward trend, as investors assess the latest threat by Donald Trump to destroy Iranian infrastructure and the implications of a prolonged war on global economic growth.

The price of the precious metal dropped by as much as 0.7%, falling below $4,620 per ounce, after already losing more than 2% in the previous two sessions. Trump has set a deadline until 8:00 p.m. (Eastern Time) on Tuesday to reach an agreement with Tehran, otherwise he will proceed with attacks on energy facilities and bridges, escalating tensions in a conflict that has already caused global energy shortages and heightened fears of rising inflation.

The conflict, now entering its sixth week, is reinforcing expectations that central banks may delay interest rate cuts or even move toward increases. U.S. Treasury bonds posted marginal gains on Monday following Trump’s renewed threats, with investors anticipating that the Federal Reserve will keep interest rates unchanged until the end of the year. Higher interest rates weigh on gold, as the metal does not yield interest.

Since the start of the conflict in the Middle East in late February, gold has fallen by approximately 12%. Its traditional role as a “safe haven” has weakened, as investors are forced to liquidate positions to cover losses in other markets. At the same time, its trajectory has largely moved inversely to that of oil, which has strengthened for a third consecutive day.

However, opposing forces are also at play. Cost pressures stemming from the energy supply shock are weighing on economic growth and, in turn, supporting gold. The U.S. services economy expanded at a slower pace in March, while employment recorded its sharpest decline since 2023 and input prices rose significantly.

As gold prices decline, there are signs that some investors are taking advantage of lower levels to build new positions. Holdings in gold-backed exchange-traded funds increased last week for the first time since the start of the war, with inflows of around 8.9 tons, according to Bloomberg calculations.

Trump reiterated on Monday, during a press conference, that reopening the Strait of Hormuz is a necessary condition for any agreement with Iran to end the conflict. This critical maritime artery, which connects the Persian Gulf with global markets, remains largely closed to navigation since the onset of hostilities.

Tehran has so far rejected U.S. proposals to end the war and has warned it will respond to any new attacks, escalating its own military operations in the Middle East.

At 10:14 a.m. Singapore time, spot gold was down 0.5% at $4,627.33 per ounce. Silver fell 1.2% to $71.96, while platinum and palladium also moved lower. At the same time, the Bloomberg Dollar Spot Index, which tracks the performance of the U.S. currency, rose by 0.1%.

Source: newmoney.gr